ITO, New Delhi V. M/s. Linux Software Pvt. Ltd, Gurgaon

ITA 4608/DEL/2009

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5026 (ITAT-DELHI)
• Duration Of Justice: 7 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 10-05-2017
• Assessment Year: 2002-2003
• Appeal Filed On: 07-12-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHRAVAN GOTRU
• Keywords: Unexplained cash credit; Accommodation entries
• Section: 143(3); 133(6); 147; 148; 68

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D : NEW DELHI BEFORE SHRI H.S.SIDHU , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 4608/DEL/2009 (ASSESSMENT YEAR: 2002 - 03 ) ITO, WARD - 4(4), ROOM NO. 234 - B, CR BUILDING, IP ESTATE, NEW DELHI VS. LINUX SOFTWARE PVT. LTD, SUITE NO. 603, JMD PACIFIC SQUARE 15, PARTI - II, GURGAON (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SHRAVAN GOTRU, SR. DR ASSESSEE BY: NONE DATE OF HEARING 22/08 / 2017 DATE OF PRONOUNCEMENT 25 / 08 / 2017 O R D E R PER PRASHANT MAHARISHI , A. M. 1. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD CIT(A)VII, NEW DELHI DATED 07.09.2009 FOR THE ASSESSMENT YEAR 2002 - 03. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THE LD COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN LAW AND CONTRARY TO FACTS AND LAW. THE GROUNDS OF APPEAL ARE AS FOLLOWS (1) THE ORDER OF THE LEARNED CIT(A) IS ERRONEOUS & CONTRARY TO FACTS & LAW. (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.34,50,000/ - MADE U/S 68 OF THE I.T. ACT BEING THE UNEXPLAINED CASH CREDIT. ((2).L THE LD CIT(A) FAILED TO APPRECIATE THE FACT THAT ASS ESSEE DID NOT DISCHARGE THE ONUS OF PROVING THE CREDITWORTHINESS OF THE CREDITORS AND GENUINENESS OF THE TRANSACTIONS. (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 APPE LLANT CRAVES LEAVE TO ADD, TO ALTER, OR AMEND A NY GROUNDS OF THE APPEAL RAISED ABOVE AT THE TIME OF HEARING. 3. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS WHETHER CIT APPEAL HAS ERRED IN DELETING THE ADDITION OF RS. 34.50 LAKHS WHICH WAS MADE BY THE LD. ASSE SSING OFFICER UNDER SECTION 68 OF THE INCOME TAX ACT . 4. ASSESSEE IS A PRIVATE LIMITED COMPANY WHICH IS FORMED WITH THE OBJECTIVE OF PRODUCING THE SOFTWARE ETC FOR TELEVISION INDUSTRIES BUT HAS NOT COMMENCED ITS BUSINESS ACTIVITY AND ONLY EARNED INTEREST FROM FIXED DEPOSITS. FOR THE YEAR THE COMPANY FILED ITS RETURN OF INCOME ON 25 / 10 / 2002 AT AN INCOME O F RS. 506250/ - . PAGE 2 OF 4 SUBSEQUENTLY , ON RECEIPT OF CERTAIN INFORMATION FROM INVESTIGATION WING OF THE INCOME TAX DEPARTMENT THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 148 ON 23/03/2007 TO THE ASSESSEE. IT WAS NOTED THAT THE ASSESSEE HAS TAKEN SHARE APPLICA TION MONEY AMOUNTING TO RS. 99.50 LACS FROM VARIOUS COMPANIES AND THEREFORE ASSESSEE WAS ASKED TO JUSTIFY THE SAME. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO PRODUCE THE PARTIES, THERE CONFIRMATION, THEIR NAMES AND ADDRESS OF T HE DIRECTORS, BALANCE SHEET SHOWING FUNDS PAID TO THE ASSESSEE AND ALSO FURNISH THEIR BANK STATEMENT S . TO THIS ASSESSEE FAILED TO SUBMIT THE REQUEST THE DETAILED AND STATED THAT IT IS NOT POSSIBLE FOR THE ASSESSEE TO PRODUCE THIS PARTIES. THE LD. ASSESSING OFFICER CONSIDERING THE REPLY MADE BY THE ASSESSEE FOR COMPANIES ARE FOUND TO BE ENGAGED IN THE BUSINESS OF PROVIDING BOGUS ENTRIES. FURTHER, THE LD. ASSESSING OFFICER HAS ALSO ISSUED NOTICE TO THIS PARTY UNDER SECTION 133(6) ON 04/12/2007, WHICH REMAINED ON RESPONDENT. FURTHER, IN CASE OF ONE OF THE COMPANY ASSESSEE DID NOT FURNISH ANY DETAILS. FURTHER, THE ASSESSING OFFICER IS ALSO NOTED THAT THESE PARTIES HAVE BEEN FOUND TO BE AN ENTRY OPERATOR IN ANY INVESTIGATION CONDUCTED AND THE DIRECTORS OF THESE C OMPANIES HAVE ADMITTED TO ROUTING UNACCOUNTED MONEY FOR THE BENEFICIARIES. THE LD. ASSESSING OFFICER FURTHER NOTED THAT SEVERAL STATEMENTS WERE RECORDED WERE THE DIRECTORS OF THESE INVEST OR COMPANIES AND THEY HAVE CONFIRMED THAT THEY ARE RUNNING THE BUSIN ESS OF PROVIDING ACCOMMODATION ENTRIES THROUGH THESE COMPANIES AND USED TO ACCEPT CASH AND ISSUED CHECKS PAY ORDERS TO THE BENEFICIARY FOR SOME COMMISSION. AND THEREFORE, THE LD. AO MADE AN ADDITION OF RS. 34.50 LACS TO THE TOTAL INCOME OF THE ASSESSEE WHI CH WAS RECEIVED DURING THE YEAR AS UNEXPLAINED CASH CREDIT BY APPLYING THE PROVISIONS OF SECTION 68 OF THE INCOME TAX ACT . CONSEQUENTLY, THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED AT RS. 3 549384/ - UNDER SECTION 143(3) READ WITH SECTION 147 OF THE INCOME TAX ACT VIDE ORDER DATED 28 .12.2007 . 5. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT A AND CONTESTED THE ADDITION OF RS. 34.50 LACS WIDE GROUND NO. 7 AND 8 OF HIS APPEAL BEFORE THE 1 ST APPELLATE AUTHORITY. THE LD. CIT (A) HA S HELD THAT THE ASSESSEE HAS PROVIDED SHARE APPLICATION FORM, THE PERMANENT ACCOUNT NUMBER OF THE SHARE APPLICANTS, THERE INCOME TAX AND ROC DETAILS, COMPLETE ADDRESS OF THE SHARE APPLICANTS. THEREFORE , ACCORDING TO HIM THE IDENTITIES, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACT ION WAS SATISFIED AND HE DELETED THE ADDITION. THEREFORE, REVENUE IS IN APPEAL BEFORE US. 6. THE LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY CONTESTED THAT THE ISSUE INVOLVED HERE IS THAT SHAREHOLDER WHO HAVE INVESTED THE MONEY HAS SHARE APPLICATION MONEY WITH THE COMPANY ARE NOTED ACCOMMODATION ENTRY PROVIDERS AND THE DIRECTORS OF THE PAGE 3 OF 4 INVEST OR COMPANY HAVE SPECIFICALLY STATED THAT THEY ARE ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES ON RECEIPT OF CASH TO THE BENEFICIARIES. HE FU RTHER SUBMITTED T HAT ALL THE COMPANIES WHO HAVE INVESTED THE SHARE CAPITAL OR SHARE APPLICATION MONEY IN THE COMPANY ARE SHELL COMPANIES. HE FURTHER STATED THAT LD. CIT ( A ) IS NOT APPRECIATED WHOLE TRANSACTION AND MERELY ON THE BASIS OF DETAILS FURNISHED BY THE ASSESSEE DEL ETED THE ABOVE ADDITION. HE FURTHER STATED THAT LD. CIT (A) HAS NOT CARRIED TO LOOK AT THE TRANSACTION IN PROPER PERSPECTIVE WHEN INVESTIGATION WING AS STATED THAT THESE ARE THE ENTRY OPERATORS. HE THEREFORE SUBMITTED THAT THE ORDER OF THE LD. CIT (A) MAY BE SET - ASIDE AND ORDER OF THE LD. AO MAY BE RESTORED. 7. DESPITE NOTICE NONE APPEARED ON BEHALF OF THE ASSESSEE AND THEREFORE THE ISSUE IS DECIDED ON THE BASIS OF RECORDS AVAILABLE BEFORE US ON THE MERITS OF THE ISSUE. IT IS FURTHER TO BE NOTED THAT THIS APPEAL IS PENDING BEFORE US, SINCE 08/02/2010 AND FOR 11 TIMES THE APPEAL IS FIXED FOR HEARING. ON MOST OF THE OCCASIONS NOBODY APPEARED ON BEHALF OF THE ASSESSEE AND ON 2 OCCASIONS THE ADJOURNMENT WAS REQUESTED BY THE LD. AR. THEREFORE , IT IS APPARENT THAT ASSE SSEE IS NOT INTERESTED IN PROSECUTING THIS APPEAL FOR THE APPARENT REASONS. 8. IT IS APPARENT THAT ASSESSEE HAS OBTAINED SHARE APPLICATION MONEY FROM ENTRY OPERATORS WHEN THE DIRECTORS OF THE INVESTOR COMPANIES HAVE CONFESSED SO, WE ARE REALLY SURPRISED THAT HOW THE LD. 1 ST APPELLATE AUTHORITY HAS DELETED THE ADDITION WITHOUT MEETING ANY OF THE OBJECTION RAISED BY THE LD. ASSESSING OFFICER. THE ORDER OF THE LD. CIT ( A ) , IS NOT AT ALL SUSTAINABLE ON THE FACTS OF THE CASE. THE LD. AO HAS ASKED THE ASSESSEE TO PRO DUCE THE PARTIES AND ALSO THE DIRECTORS OF THE INVESTOR COMPANY WHICH ASSESSEE HAS EXPRESSED HIS INABILITY. FURTHER, THE NOTICES SENT UNDER SECTION 133(6) OF THE INCOME TAX ACT WERE ALSO NOT RESPONDED. MERELY SHOWING THAT INVESTOR COMPANIES ARE REGISTERED WITH REGISTRAR OF COMPANIES AND ARE HAVING PERMANENT ACCOUNT NUMBER DOES NOT PROVE THE CREDITWORTHINESS AND GENUINENESS OF THESE PARTIES. IN FACT WHEN THE DIRECTORS OF THE INVESTOR COMPANY HAVE CONFESSED THAT THEY ARE ENGAGED IN THE BUSINESS OF PROVIDING A CCOMMODATION ENTRIES , IT IS PROVED THAT THE SHARE APPLICATION MONEY OBTAINED BY THE ASSESSEE IS NOT GENUINE. AS THE FINDINGS OF THE LD. CIT ( A ) ARE INCOMPLETE WITH RESPECT TO THE CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION, WE SET ASIDE THE WHOLE I SSUE BACK TO THE FILE OF THE LD. CIT( A ) , WITH A DIRECTION TO DECIDE THE ISSUE ONCE AGAIN LOOKING AT THE FACT OF THE CASE THAT INVESTOR COMPANIES ARE ENTRY OPERATORS. THE LD. CIT (A) IS ALSO DIRECTED TO EXAMINE THE INVESTORS BY ISSUE OF SUMMONS OR BY R EMANDING THE MATTER BEFORE THE LD. ASSESSING OFFICER WITH A DIRECTION TO THE ASSESSEE TO PRODUCE THE DIRECTORS OF PAGE 4 OF 4 THE INVESTOR COMPANIES TO PROVE THE GENUINENESS OF THE CASH CREDITS. IN THE RESULT, THE SOLITARY GROUND OF APPEAL OF THE REVENUE IS ALLOWED AC CORDINGLY. 9. IN THE RESULT APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 2 5 / 08 / 2017 . - S D / - - S D / - ( H.S.SIDHU ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 5 / 08 / 2017 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI