ITO, New Delhi V. M/s Elcon Alloys Ltd., Delhi

ITA 4657/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3807 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-05-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 09-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K CHAND
• Assessee Lawyers: B L GUPTA ITP
• Keywords: Accommodation entries
• Section: 195; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B : NEW DELHI BEFORE SHRI A.D.JAIN, JM AND SHRI R.C.SHARMA, AM ITA NO.4657/DEL/2009 ASSESSMENT YEAR : 2006-07 INCOME TAX OFFICER, WARD-11(1), NEW DELHI. VS. M/S ELCON ALLOYS LIMITED, B-284, MIG FLATS, EAST OF LONI ROAD, DELHI. PAN NO.AABCE1509Q. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI N.K.CHAND, DR. RESPONDENT BY : SHRI B.L.GUPTA, ITP. ORDER PER R.C.SHARMA, AM : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DATED 14.10.2009 FOR THE AY 2006-07, IN THE MATTER OF DEL ETION OF ADDITION ON ACCOUNT OF SHARE CAPITAL. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. IN THE COURSE OF ASSESSMENT U/S 143(3), THE AO FOUND THAT ASSESSEE C OMPANY HAS RAISED SHARE CAPITAL OF RS.23 LAKHS ON ACCOUNT OF SHARE APPLICAT ION MONEY FROM FIVE PARTIES, NAMED BELOW:- I) USUAL LEASING FINANCE (P) LTD. : RS.5,00,000/- II) MANTECH LEASING (P) LTD. : RS.5,00,000/- III) SMUG PHARMA (P) LTD. : RS.4,00,000/- IV) GOLD STONE FINANCE (P) LTD. : RS.5,00,000/- V) NAIVEDYA SHARMA : RS.4,00,000/- 3. THE AO EXAMINED THE BANK ACCOUNTS OF THE SHARE A PPLICANT COMPANIES AND FOUND THAT THERE WERE CASH DEPOSITS IN THEIR BANK A CCOUNT. HE ALSO FOUND THAT THE ITA-4657/D/2009 2 INCOME OF THESE COMPANIES WAS MEAGER. HE HAS ALSO STATED THAT THESE COMPANIES WERE NOT PRODUCED FOR EXAMINATION. IN RESPECT OF T HE SHARE APPLICATION MONEY FROM MR.NAIVEDYA SHARMA, THE AO STATED THAT HIS BAN K ACCOUNT WAS NOT FILED EVEN THOUGH INCOME TAX RETURN COPY WAS FILED. SHARE APP LICATION WAS ALSO FILED. THE AO HAS ALSO STATED THAT THE ASSESSEE COMPANY HAD TA KEN SUCH ACCOMMODATION ENTRIES EVEN IN THE PREVIOUS YEARS. FOR ALL THESE REASONS, THE AO TREATED THE AMOUNT OF RS.23 LAKHS AS INCOME U/S 68 OF THE IT AC T. THE AO ALSO ESTIMATED THAT THE ASSESSEE MUST HAVE PAID A COMMISSION OF RS.46,0 00/- TO OBTAIN SUCH ACCOMMODATION ENTRIES AND ACCORDINGLY, AN ADDITION OF RS.46,000/- WAS ALSO MADE TO THE TOTAL INCOME U/S 69. 4. BY THE IMPUGNED ORDER, CIT(A) DELETED THE ADDITI ON BY RECORDING A FINDING THAT ASSESSEE HAS PROVED THE IDENTITY OF THE SHARE APPLICANTS. FOUR APPLICANTS OUT OF THE FIVE ARE CORPORATE ENTITIES AND IDENTITY IPS O FACTO STANDS PROVED EVEN OTHERWISE THE ASSESSEE HAS FILED THE CONFIRMATIONS ETC., WHICH HAVE NOT BEEN FOUND TO BE UNTRUE OR INCORRECT. SIMILARLY, THE REMAININ G APPLICANT SHRI NAIVEDYA SHARMA, WHO IS A DIRECTOR IN THE ASSESSEE COMPANY I S ASSESSED TO TAX AND HAS CONFIRMED TO HAVE GIVEN THE SHARE APPLICATION MONEY AND HAS FILED COPY OF INCOME TAX RETURN, WHICH CONTAINS HIS PAN AND WARD NO., HE NCE THE IDENTITY OF SHRI NAIVEDYA SHARMA ALSO STANDS PROVED. IN VIEW OF THE SE FACTS AND JUDICIAL PRONOUNCEMENTS AS DISCUSSED IN THE ORDER, HE DELETE D THE ADDITION. 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FOU ND FROM THE RECORD THAT AO HAS MADE ADDITION ON ACCOUNT OF SHARE CAPITAL RA ISED DURING THE YEAR BY STATING THAT SIMILAR ADDITION OF RS.12 LAKHS WAS MADE IN TH E PRECEDING AY 2003-04. WE FOUND THAT TRIBUNAL VIDE ORDER DATED 5.8.2009 HAD D ELETED THE SAID ADDITION ON ACCOUNT OF SHARE CAPITAL. DURING THE YEAR UNDER CO NSIDERATION, THE AO STATED THAT THERE WAS CASH DEPOSIT IN THE BANK ACCOUNT OF THE S HAREHOLDERS AND THAT THESE SHAREHOLDERS WERE NOT PRODUCED FOR EXAMINATION. TH E CIT(A) HAS DELETED THE ITA-4657/D/2009 3 ADDITION AFTER RECORDING A FINDING WITH EFFECT TO T HE IDENTITY OF THE SHARE APPLICANTS WHO WERE ALSO FILING INCOME TAX RETURNS HAVING PAN NO. ETC. WE FOUND THAT SIMILAR ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN A SSESSEES OWN CASE FOR THE AY 2003-04 VIDE ORDER DATED 5.8.2009 IN ITA NO.2218/DE L/2009 BY RELYING ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF LO VELY EXPORTS 216 CTR 195, WHEREIN HONBLE APEX COURT HAS HELD THAT IF THE SHA RE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE FROM ALLEGED BOGUS SHAREHO LDERS, WHOSE NAMES ARE GIVEN TO THE AO, THE DEPARTMENT IS FREE TO PROCEED TO REO PEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW, BUT IT CANNOT BE REGARDED A S UNDISCLOSED INCOME OF THE COMPANY. 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 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 ITA-4657/D/2009 4 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 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 AND RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE AND KEEPING IN VIEW THE FINDING RECORDED BY THE CIT(A) WHICH HAS NOT BEEN CONTROVERTED BY THE LEARN ED DR DURING THE COURSE OF HEARING, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DELETING THE ITA-4657/D/2009 5 ADDITION IN THE HANDS OF ASSESSEE COMPANY. HOWEVER , KEEPING IN VIEW THE SPIRIT OF DECISION OF HON'BLE SUPREME COURT IN THE CASE OF LO VELY EXPORTS (SUPRA), THE DEPARTMENT IS FREE TO PROCEED AGAINST THE SHARE APP LICANTS AS PER PROVISIONS OF IT ACT. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED, IN TERMS INDICATED HEREINABOVE. DECISION PRONOUNCED IN THE OPEN COURT ON 11 TH JUNE, 2010. SD/- SD/- (A.D.JAIN) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 11.06.2010. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR ITA-4657/D/2009 6