ITO, New Delhi V. M/s Lokesh Secfin Pvt. Ltd., Kolkata

ITA 460/DEL/2011

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4930 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 03-05-2017
• Assessment Year: 2001-2002
• Appeal Filed On: 27-01-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHRAVAN GOTRU
• Keywords: Unexplained cash credit; Accommodation entries; Reassessment proceedings
• Section: 133(6); 148; 68

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH 'D, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 460/DEL/2011 A.Y. 2001-02 INCOME TAX OFFICER, VS. M/S LOKESH SECFIN PVT. L TD. WARD 4(4), NEW DELHI NO. 6/13, NORTH AVENUE, ROOM NO. 234-B, KESAVAPERUMALPURAM, C.R. BUILDING, I.P. ESTATE, CHENNAI 600028 NEW DELHI (PAN: AAACL2189C) (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. SHRAVAN GOTRU, SR. DR ASSESSEE BY : NONE ORDER PER H.S. SIDHU, JM : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-VII, NEW DELHI DATED 02.11.2010 PERTAINING TO ASSESSMENT YEAR 2001-02 ON THE FOLLOW ING GROUNDS:- 1. THE ORDER OF THE LD. CIT(A) IS ERRONEOUS AND CONTRARY TO FACTS AND LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING TH E 2 ADDITION MADE O FRS. 71,76,750/- MADE U/S. 68 OF TH E I.T. ACT BEING THE UNEXPLAINED CASH CREDITS. 2.1 THE LD. CIT(A) IGNORED THE FINDINGS RECORDED B Y THE AO AND THE FACT THAT THE ASSESSEE IS INVOLVED I N THE BUSINESS OF RECEIVING ACCOMMODATION ENTRIES. 3. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, OR AMEND ANY GROUNDS OF THE APPEAL RAISED ABOVE AT THE TIME OF THE HEARING. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE COMPANY IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF FINANCE AND INVESTMENT ACTIVITIES. THE PRIMARY BUSINESS OF THE COMPANY IS TO PURCHASE AND SALE OF SHARES OF VARIOUS COMPANIES AN D TO INVEST IN SHARES OF DIFFERENT COMPANIES. FOR AY 2001-02 THE RETURN O F INCOME WAS FILED ON 31.10.2001 DECLARING NIL INCOME. THE RETURN OF TH E ASSESSEE WAS PROCESSED U/SD. 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS THE ACT) ON 28.6.2002. SUBSEQUENTLY A NOTICE U/S . 148 OF THE ACT DATED 31.3.2008 WAS ISSUED. FINALLY, THE REASSESSMENT ORD ER WAS COMPLETED ON 26.12.2008 DETERMINING THE TOTAL INCOME AT RS. 71, 49,221/- WHEREIN THE AO HAS MADE AN ADDITION OF RS. 71,76,750/- UNDER SE CTION 68 OF THE ACT. AGAINST THE ASSESSMENT ORDER, THE ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER DATED 2.11.2010 HAS DELETED THE ADDITION IN DISPUTE BY PARTLY ALLOWING THE APPEAL O F THE ASSESSEE. 3 AGGRIEVED WITH THE IMPUGNED ORDER PASSED BY THE LD . CIT(A), REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 3. LD. DR RELIED UPON THE ORDER OF THE AO AND REITE RATED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL. HE FUR THER STATED THAT LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE OF R S. 71,76,750/- MADE U/S. 68 OF THE ACT BEING THE UNEXPLAINED CASH CREDI T AND ALSO SUBMITTED THAT LD. CIT(A) HAS IGNORED THE FINDINGS RECORDED BY THE AO AND THE FACT THAT THE ASSESSEE IS INVOLVED IN THE BUSINESS OF RE CEIVING ACCOMMODATION ENTRIES. 4. IN THIS CASE, NOTICE OF HEARING TO THE ASSESSEE WAS SENT BY THE REGISTERED AD POST, IN SPITE OF THE SAME, ASSESSEE, NOR HIS AUTHORIZED REPRESENTATIVE APPEARED TO PROSECUTE THE MATTER IN DISPUTE, NOR FILED ANY APPLICATION FOR ADJOURNMENT. KEEPING IN VIEW THE F ACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND THE ISSUE INV OLVED IN THE PRESENT APPEAL, WE ARE OF THE VIEW THAT NO USEFUL PURPOSE W OULD BE SERVED TO ISSUE NOTICE AGAIN AND AGAIN TO THE ASSESSEE, THERE FORE, WE ARE DECIDING THE PRESENT APPEAL EXPARTE QUA ASSESSEE, AFTER HEAR ING THE LD. DR AND PERUSING THE RECORDS. 5. WE HAVE HEARD THE LD. DR AND PERUSED THE RECORD S, ESPECIALLY THE ORDER OF THE LD. CIT(A). WE FIND THAT LD. FIRST APP ELLATE AUTHORITY HAS ADJUDICATED THE ISSUE IN DISPUTE VIDE PARA NO. 4.1 TO 4.4 AT PAGE NO. 5 TO 8 OF THE IMPUGNED ORDER. THE SAID RELEVANT FINDING S OF THE LD. CIT(A) ARE REPRODUCED AS UNDER:- 4 4.1 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS M ADE ON BEHALF OF THE APPELLANT, THE FINDINGS OF THE ASS ESSING OFFICER IN THE ASSESSMENT ORDER AS WELL AS IN THE R EMAND REPORT AND THE FACTS ON RECORD. IT IS OBSERVED THAT THE AO BASED HIS ARGUMENTS PURELY ON THE BASIS OF INFORMATION FROM INVESTIGATION WING OF THE INCOME-T AX DEPARTMENT, NEW DELHI. HE HAS ENTIRELY RELIED UPON SUCH INFORMATION FOR REACHING SUCH CONCLUSION. THE ABOVE INFORMATION MAY BE A SUFFICIENT GROUND TO INI TIATE REASSESSMENT PROCEEDINGS OF A CASE, BUT TO MAKE AN ADDITION THE AO HAS TO ESTABLISH THE FACT OF FRAUDU LENT NATURE OF SUCH TRANSACTION. PURELY ON SURMISES AND CONJECTURES NO TRANSACTION CAN BE HELD AS BOGUS UNL ESS THE SAME IS PROVED ON THE BASIS OF SOUND REASONING AND EVIDENCE ON THE PART OF THE AO BEFORE MAKING THE ADDITION. WHEN THE ASSESSEE HAS FURNISHED ALL NECES SARY PROOF IN SUPPORT OF ITS CLAIM, IT IS ALL THE MORE N ECESSARY TO REBUT SUCH EVIDENCE WITH COGENT AND CREDIBLE EVIDENCE ON. THE PART OF AO BEFORE MAKING THE ADDIT ION. THE AMOUNT OF RS. 71,76,750/- HAS BEEN FULLY EXPLA INED BY THE ASSESSEE WITH SUPPORTIVE EVIDENCE AND INFORMATION. THE SOURCE OF CASH HAS ALSO BEEN FULLY EXPLAINED AND THE AMOUNT RECEIVED FROM M/S IRIS 5 INFRASTRUCTURAL PVT LTD, M/S MKM FINSEC PVT LTD AND M/S' KAUL SECURITIES PVT LTD HAS BEEN FULLY EXPLAINED. I N FACT, NO NEW CAPITAL HAS BEEN INTRODUCED IN THE ACCOUNT. THIS ALSO IMPLIES 'THAT THERE HAS NEITHER BEEN FRESH LOA N NOR FRESH SHARE CAPITAL INTRODUCED IN THE ACCOUNTS OF T HE APPELLANT COMPANY DURING THE YEAR UNDER CONSIDERATI ON. THE PERUSAL OF THE ACCOUNTS OF THE APPELLANT COMPAN Y DOES NOT LEAVE ANY ROOM FOR DOUBT THAT THE SAID AMO UNT WAS NOTHING BUT THE SALE PROCEEDS OF THE SHARES OF THE COMPANIES, NAMELY M/S PADMINI POLYMER PVT LTD. AND OTHER COMPANIES WHICH HAVE ALREADY BEEN SHOWN BY TH E APPELLANT IN THE PROFIT & LOSS ACCOUNT FOR A.Y. 200 1-02. WHEN THE SALE PROCEEDS OF THE SHARES HAVE ALREADY B EEN SHOWN BY THE APPELLANT AND THE SAME HAVE ALSO BEEN OFFERED AS INCOME, IT CANNOT BE BROUGHT TO TAX AGAI N IN THE SAME A.Y. 2001-02 WHICH IS UNDER APPEAL. 4.2 IT IS ALSO SEEN THAT THE ASSESSING OFFICER COUL D NOT POINT OUT ANY DISCREPANCY IN THE EVIDENCES RELIED U PON BY THE ASSESSEE. HE HAS NEITHER BROUGHT OUT ANY DIR ECT OR INFERENTIAL EVIDENCE TO CONTRADICT THE CONTENTIO N OF THE ASSESSEE. IT IS FURTHER OBSERVED THAT EVEN THOU GH AO. HAS VAST POWERS ULS 131 AND 133(6) OF THE ACT, HE HAS NOT USED ANY OF HIS POWERS TO VERIFY THE 6 GENUINENESS OF THE CLAIM OF THE ASSESSEE BY VERIFYI NG THE DOCUMENTS FURNISHED BY IT. IF AO. HAD DOUBTED T HE IMPUGNED TRANSACTION AFTER RECEIVING THE EVIDENCES WHICH HAD BEEN PRODUCED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM IT WAS VERY MUCH OPEN TO THE A.O. TO DO H IS INDEPENDENT ENQUIRY AND VERIFICATION. THIS HAS NOT BEEN DONE BY THE A.O. FURTHER, WHAT IS THE DESIRED DOCUMENTARY EVIDENCE REQUIRED TO SUPPORT THE CLAIM OF THE ASSESSEE AS REQUIRED BY THE AO. IS NOT COMING O UT OF THE ORDER OF THE A.O. THE APPELLANT HAS ADDUCED THE DOCUMENTARY EVIDENCES I SUPPORT OF THE TRANSACTION IN QUESTION. THE IDENTITY OF THE PURCHASER OF THE SHAR ES WAS ESTABLISHED AS IT WAS BORNE ON THE RECORD ON TH E INCOME-TAX DEPARTMENT. DURNING TO THE SHARES WHICH WERE SOLD BY THE APPELLANT AS PER ITS VERSION, THER E IS NO EVIDENCE OR MATERIAL TO EVEN SUGGEST, AS POINTED OU T ON BEHALF OF THE APPELLANT, THAT THE CHEQUES DIRECTLY OR INDIRECTLY EMANATED FROM THE ASSESSEE SO THAT IT CO ULD BE. SAID THAT THE ASSESSEE'S OWN MONEY WAS BROUGHT PACK IN THE GUISE OF SALE PROCEEDS OF THE SHARES. THOUGH, THE PURCHASERS OF THE SHARES COULD NOT BE EXAMINED BY THE AO, SINCE THEY WERE EXISTING ON THE FILE OF THE INCOME TAX DEPARTMENT AND ITS INCOME TAX DET AILS WERE MADE AVAILABLE TO THE A.O, IT WAS EQUALLY THE DUTY 7 OF THE AO TO HAVE TAKEN STEPS TO VERIFY ITS ASSESSM ENT RECORDS AND IF NECESSARY TO ALSO HAVE THEM EXAMINED BY THE RESPECTIVE AO HAVING JURISDICTION OVER IT WHICH HAS NOT BEEN DONE BY HIM. 4.3 SINCE THE ADDITION HAS BEEN MADE AS UNEXPLAINED CASH CREDIT, IT IS CONSIDERED NECESSARY TO EXAMINE THE CASE IN THE LIGHT OF THE PROVISIONS OF SECTION 68 O F THE ACT. UNDER SECTION 68 OF THE ACT IF ANY SUM IS FOUN D CREDITED IN THE BOOKS OF ACCOUNTS OF THE APPELLANT & THE APPELLANT OFFERS NO EXPLANATION ABOUT THE NATURE AN D SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT SATISFACTORY IN THE OPINION OF THE ASSESSING OFFICE R, THE SUM SO CREDITED MAY BE CHARGED TO INCOME TAX AS THE INCOME OF THE ASSESSEE OF THE RELEVANT PREVIOUS YEA R. THEREFORE, WHAT HAS TO BE ENQUIRED INTO BY THE ASSESSING OFFICER IS THE NATURE & 'SOURCE OF THE SU M OR DEPOSIT. IF THE EXPLANATION WITH REGARD TO NATURE & SOURCE IS NOT FOUND SATISFACTORY, ONLY THEN THE AMO UNT SO CREDITED MAY BE TREATED AS INCOME. SECTION 68 HA S COME UP FOR CONSIDERATION BEFORE VARIOUS HIGH COURT S WHICH HAVE HELD THAT THE ASSESSEE HAS TO PROVE THRE E CONDITIONS (I) IDENTITY OF THE CREDITOR (II) CAPACI TY OF SUCH CREDITOR TO ADVANCE MONEY & (III) GENUINENESS O~ THE TRANSACTION. [VIDE SHANKAR INDUSTRIES V. CIT (1 978) 8 114 ITR 689 (CAL.); C. KANT & COMPANY V. CIT (1980) 126 ITR 62 (CAL.); PRAKASH TEXTILE AGENCY VS. CIT (1980) 121 ITR 890 (CAL.); ORIENTAL WIRE INDUSTRIES PVT. LTD .. VS. CIT (1981) 131 ITR 688; CIT VS. B.C. MOH ANTY (1995) 212 ITR 199(ORI.); LALAN TIMBERS VS. CIT (19 97) 223 ITR 11 (GAU.) & CIT VS. KORLAY TRADING COMPANY LTD. (1999) 232 ITR 820 (CAL.)]. IF ALL THE AFORESAID THREE CONDITIONS ARE PROVED TH E BURDEN SHIFTS ON THE REVENUE TO PROVE THAT THE AMOU NT BELONGED TO THE ASSESSEE. [CIT VS. UNITED COMMERCIA L & INDUSTRIAL CO. (P) LTD. (1,991) 187 ITR 596 (CAL.); M.A. UNNEERI KUTTY VS. CIT (1992) 198 ITR 147 (KER.); CI T VS. PRECISION FINANCE P. LTD. (1994) 208 ITR 495 (C AL.); IT HAS ALSO BEEN HELD BY THE VARIOUS HIGH COURTS TH AT THE ASSESSEE CANNOT BE ASKED TO PROVE THE SOURCE OF SOURCE OR THE ORIGIN OF ORIGIN. REFERENCE MAY BE MA DE THE DECISIONS IN S. HASTIMAL VS. CIT (1963) 49 ITR 273 (MAD.); TOLA RAM DAGA VS. CIT (1966)59 ITR 632 (GAU.); CIT VS. DAULAT RAM RAWATMULL (1973) 87 ITR 349 (SC); SARGOI CREDIT CORPN. V S. CIT (1976) 103 ITR 344 (PAT.); CIT VS. ORISSA CORPN. (P) LTD. (1986) 1 59 ITR 78 (SC) & KISHAN CHAND CHELLARAN VS. CIT 125 71 3 (SC). IN THIS REGARD, IT IS IMPORTANT TO TAKE NOTE OF THE 9 JUDGMENT IN THE CASE OF KISHAN CHAND CHELLARAM (SUPRA) HOLDING THAT THE BURDEN IS ON THE DEPARTMEN T TO SHOW THAT THE MONEY BELONGED TO THE ASSESSEE BY BRINGING PROPER EVIDENCE ON RECORD & THE ASSESSEE C OULD NOT BE EXPECTED TO PUT EVIDENCE TO HELP THE DEPART MENT TO DISCHARGE THE BURDEN THAT LAY UPON IT. THE EVIDE NCE, IF ANY, GATHERED BEHIND THE BACK OF THE ASSESSEE CA NNOT BE USED AGAINST HIM WITHOUT CONFRONTING HIM WITH IT . THERE IS NO EVIDENCE ON THE BASIS OF WHICH ASSESSIN G OFFICER WOULD COME TO A FINDING THAT SUM CREDITED I N THE BANK ACCOUNT OF THE ASSESSEE REPRESENTED THE UNDISCLOSED INCOME OF ASSESSEE. 4.4 IN THESE CIRCUMSTANCES, IT IS HELD THAT THE AD DITION OF RS. 71,76,750/- CANNOT BE SUSTAINED AND ACCORDINGLY, THE SAME IS DIRECTED TO BE DELETED. AS A RESULT, GROUNDS OF APPEAL NO. 8 & 9 ARE ALLOWED. 7. ON GOING THROUGH THE AFORESAID FINDINGS OF THE LD.CIT(A) AS WELL AS THE FINDING OF THE ASSESSING OFFICER MADE IN THE AS SESSMENT ORDER, WE FIND THAT AO HAS PASSED THE ASSESSMENT ORDER 26.12 .2008 U/S. 144/147 OF THE INCOME TAX ACT, 1961 I.E. EXPARTE QUA ASSESS EE BY HOLDING THAT ASSESSEE HAS FAILED TO GIVE SATISFACTORY EXPLANATIO N ABOUT THE NATURE AND SOURCE OF THE AMOUNT OF RS. 71,76,750/- CREDITED IN ITS BANK ACCOUNTS AND DISCHARGE ITS ONUS OF PROVING THE GENUINENESS OF TR ANSACTIONS AND 10 CREDITWORTHINESS OF THE PARTIES FROM WHOM THE AMOUN T HAS BEEN RECEIVED. HOWEVER, THE LD. CIT(A) IN HIS IMPUGNED ORDER THAT AO HELD HAS NEITHER BROUGHT OUT ANY DIRECT OR INFERENTIAL EVIDENCE TO C ONTRADICT THE CONTENTION OF THE ASSESSEE. HE FURTHER STATED THAT AO HAS NOT USED ANY OF HIS POWERS TO VERIFY THE GENUINENESS OF THE CLAIM OF THE ASSES SEE BY VERIFYING THE DOCUMENTS FURNISHED BY IT. HE FURTHER STATED THAT I F THE AO HAD DOUBTED THE IMPUGNED TRANSACTION AFTER RECEIVING THE EVIDEN CES WHICH HAD BEEN PRODUCED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM IT WAS VERY MUCH OPEN TO THE AO TO DO HIS INDEPENDENT EVIDENCE REQUIRED TO S UPPORT THE CLAIM OF THE ASSESSEE AS REQUIRED BY THE AO IS NOT COMING OU T OF THE ORDER OF THE AO. BUT THE AO IN HIS ASSESSMENT ORDER HELD THAT AS THE ASSESSMENT PROCEEDINGS WERE GETTING TIME BARRED ON 31.12.2008 AND IN SPITE OF THE HAVING BEEN GIVEN NUMEROUS OPPORTUNITIES, ASSESSEE HAS NOT FURNISHED ANY OF THE DETAILS ASKED VIDE QUESTIONNAIRE AND ORD ER SHEET ENTRIES. IN VIEW OF AFORESAID DISCUSSIONS, WE ARE OF THE CONSID ERED VIEW THAT THE ASSESSEE REMAIN NON-COOPERATIVE BEFORE THE AO AND DID NOT FILE REQUISITE DOCUMENTS BEFORE THE AO, AS ASKED BY HIM, AS A RESU LT THEREOF THE AO PASSED THE EXPARTE ORDER U/S. 144/147 OF THE ACT A ND THEREFORE, DID NOT VERIFY THE DOCUMENTS FURNISHED BY THE ASSESSEE AND ALSO NOT DONE THE INDEPENDENT INQUIRY AND VERIFICATION. THEREFORE, IN THE INTEREST OF JUSTICE, WE THINK IT PROPER TO SET ASIDE THE ISSUE IN DISP UTE TO THE FILE OF THE AO TO DECIDE THE SAME AFRESH, AFTER MAKING INDEPENDE NT INQUIRY AND VERIFICATION, AS DEEM FIT. HOWEVER, THE ASSESSEE I S ALSO DIRECTED TO SUBMIT ALL THE NECESSARY DOCUMENTS, AS ASKED BY THE AO DUR ING THE ASSESSMENT 11 PROCEEDINGS AND FULLY COOPERATE WITH THE AO AND DID NOT TAKE ANY UNNECESSARY ADJOURNMENT. ACCORDINGLY, THE ISSUE IN DISPUTE IS SET ASIDE TO THE FILE OF THE AO WITH THE AFORESAID DIRECTIONS. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 01/09/2017. SD/- SD/- (PRASHANT MAHARISHI) (H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 01/09/2017 'SRBHATNAGAR' COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES