Meena Nayyar, New Delhi V. ITO WARD - 41(5), New Delhi

ITA 4788/DEL/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2301 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 27-05-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C P SINGH
• Keywords: Unexplained cash credit; Question of law
• Section: 131; 68; 148

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI SMC-I BENCH, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 4788/DEL/2019 [ASSESSMENT YEAR: 2009-10] SMT. MEENA NAYYAR, VS. ITO, WARD 41(5), 2B/12, EAST PUNJABI BAGH, NEW DELHI 2 NEW DELHI 110 026 (PAN AAFPN7941Q) [APPELLANT] [RESPONDENT] ASSESSEE BY: SHRI VED JAIN, ADVOCATE REVENUE BY : SH. C.P. SINGH, SR. D R. ORDER THIS APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX [APPEALS-34], NEW DELHI DATED 26.4.2019 PERTAINING TO ASSESSMENT YEAR 2009-10 AND RAISED AS MANY AS 08 GROUNDS ON LEGAL ISSUE AS WELL AS ON MERIT. HOWEVER, LD. CO UNSEL FOR THE ASSESSEE HAS ONLY ARGUED THE GROUND NO. 7 ON THE MERIT AND N OT ARGUED THE GROUNDS ON THE LEGAL ISSUES NO. 1 TO 6, HENCE, THE SAME ARE DISMISSED AS SUCH. GROUND NO. 8 IS GENERAL IN NATURE, HENCE, DO NOT REQUIRE ADJUDICATION. FOR THE SAKE OF CONVENIENCE, THE SOLE GROUND NO. 7 ARGUED BY THE LD. COUNSEL FOR THE ASSESSEE IS REPRODUCED A S UNDER:- 7. (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW I N CONFIRMING THE ADDITION OF AN AMOUNT OF RS. 7,50,00 0/- MADE BY AO ON ACCOUNT OF AMOUNT RECEIVED IN THE BANK ACCOUNT OF THE ASSESSEE TREATING THE SAME AS UNEXPLAINED CREDITS UNDER SECTION 68 OF THE ACT. (II) THAT THE SAID ADDITION HAS BEEN CONFIRMED RE JECTING THE DETAILED EXPLANATION AND EVIDENCES BROUGHT ON RECORD BY THE ASSESSEE TO PROVE THE IDENTITY AND 2 CREDITWORTHINESS OF THE LENDERS AS WELL AS THE GENUINENESS OF THE TRANSACTION. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A DIRECTOR IN M/S R.G. CONSULTANTS PRIVATE LIMITED. ON 23.11.2010, A SURVEY WAS CONDUCTED AT THE PREMISES OF R.G. CONSULTANTS PRIVATE LIMITED . THEREAFTER, IT WAS OBSERVED THAT THERE WERE SOME CASH CREDITS FROM THE RELATED PARTIES, WHICH LED THE LD. DCIT, CIRCLE 15(1)) CONCLUDE THE ASSESSMENT, BY MAKING AN ADDITION OF RS 22,70,000/-. ON APPEAL, THE LD. C IT(A), DELETED THE ADDITIONS IN THE HANDS OF THE M/S R.G. CONSULTANTS PRIVATE LIMITED. BUT, THE CIT(A) DIRECTED THE AO TO VERIFY THE SOURCE OF INVESTMENT IN THE HANDS OF THE ASSESSEE. SUBSEQUENTLY, THE AO, VIDE NOTICE DATED 01.06.2016 ISSUED U/S 148 OF THE ACT, REOPENED THE CASE OF THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE VIDE REPLY DATED 30.11.2016 SUBMITTED THAT THE ASSESSEE HAS GIVEN A LOAN OF RS.7,50,000/- TO M/S R.G. CONSULTANTS PVT. LTD. TH E ASSESSEE FURTHER SUBMITTED THAT OUT OF RS. 7,50,000/-, THE LOAN OF R S. 4,00,000/- WAS OBTAINED FROM HIS FRIEND THROUGH ACCOUNT PAYEE CHEQ UE AND THE BALANCE LOAN OF RS. 3,50,000/- WAS OBTAINED BY TRANSFER FRO M ASSESSEE'S SON, MASTER VINAYAK NAYYAR'S ACCOUNT. HOWEVER, THE AO DI SREGARDED THE EXPLANATIONS SUBMITTED BY THE ASSESSEE AND MADE AN ADDITION OF RS. 7,50,000/- IN THE HANDS OF THE ASSESSEE AND ALLEGED THAT THE ASSESSEE HAS RECEIVED THIS AMOUNT FROM M/S FEDERAL EXCHANGE AND THE AMOUNT RECEIVED IN THE BANK ACCOUNT OF THE MINOR SON WAS A LSO RECEIVED FROM M/S FEDERAL EXCHANGE AND THUS, HAS NOT ESTABLISHED THE IDENTITY, GENUINENESS AND CREDIT WORTHINESS OF THE PERSON, FROM WHOM THE LOAN WAS RECEIVED. AGAINST THE ORDER OF THE ASSESSING OFFICER, ASSESSE E FILED AN APPEAL BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER DATED 2 6.4.2019 HAS CONFIRMED THE ADDITION IN DISPUTE BY DISMISSING THE APPEAL OF THE ASSESSEE. AGGRIEVED WITH THE IMPUGNED ORDER, ASSESS EE APPEALED BEFORE THE TRIBUNAL. 3 3. AT THE TIME OF HEARING, LD. COUNSEL FOR THE ASSE SSEE SUBMITTED THAT LD. CIT(A) HAS WRONGLY CONFIRMED THE ADDITION OF R S. 7,50,000/- MADE BY THE AO ON ACCOUNT OF AMOUNT RECEIVED IN THE BANK ACCOUNT OF THE ASSESSEE TREATING THE SAME AS UNEXPLAINED CREDITS U NDER SECTION 68 OF THE ACT. IT WAS FURTHER SUBMITTED THAT LD. CIT(A) HAS CONFIRMED THE ADDITION IN DISPUTE BY REJECTING THE DETAILED EXPLANATION A ND EVIDENCED BROUGHT ON RECORD BY THE ASSESSEE TO PROVE THE IDENTITY AND CR EDITWORTHINESS OF THE LENDERS AS WELL AS THE GENUINENESS OF THE TRANSACTI ON. TO SUPPORT HIS AFORESAID CONTENTION, HE FILED THE WRITTEN SUBMISSI ONS AS WELL AS PAPER BOOK CONTAINING PAGES 1-100 IN WHICH HE HAS ATTACH ED THE VARIOUS DOCUMENTARY EVIDENCE TO SUPPORT THE CASE OF THE ASS ESSEE AND REQUESTED BY CONSIDERING THE WRITTEN SUBMISSIONS AS WELL AS THE DOCUMENTARY EVIDENCES, THE ADDITION CONFIRMED BY THE LD. CIT(A) MAY PLEASE BE DELETED. 4. ON THE CONTRARY, LD. DR RELIED UPON THE ORDER OF THE LD. CIT(A). 5. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS ESPECIALLY THE IMPUGNED ORDER OF THE LD. CIT(A), WRITTEN SUBM ISSIONS FILED BY THE ASSESSEES COUNSEL AND THE CASE LAWS RELIED THEREIN AND THE PAPER BOOK CONTAINING PAGES 1-100 IN WHICH THE HE HAS ATTACHE D THE COPY OF ACKNOWLEDGEMENT OF INCOME TAX RETURN ALONGWITH CO MPUTATION OF INCOME; COPY OF NOTICE UNDER SECTION 148 OF THE ACT ISSUED BY THE AO; COPY OF REPLY SUBMITTED BY THE ASSESSEE; COPY OF RE PLY SUBMITTED BY THE ASSESSEE DATED 30.11.2016 ENCLOSING THEREWITH THE RELEVANT EXTRACT OF BANK STATEMENT OF THE ASSESSEE AND THE AUDITED FIN ANCIALS OF RG CONSULTANTS; COPY OF RULE 46A APPLICATION SUBMITTED BEFORE THE CIT(A) ENCLOSING THEREWITH THE COPY OF PASSPORT OF MR. BAB U JETHANI, COPY OF VISA OF UNITED ARAB EMIRATES OF MR. BABU JETHANI, COPY O F RESIDENCE IDENTITY CARD OF UNITED ARAB EMIRATES OF MR. BABU JETHANI, C OPY OF CONFIRMATIONS; COPY OF WRITTEN SUBMISSIONS FILED BEFORE THE LD. CI T(A); COPY OF REMAND REPORT, COPY OF REJOINDER FILED BEFORE THE CIT(A) A ND THE COPY OF ORDER OF CIT(A) IN THE CASE OF SHIV KUMAR NAYYAR DATED 28.5. 2019. AFTER PERUSING THE WRITTEN SUBMISSIONS AS WELL AS THE DOCUMENTAR Y EVIDENCES, I AM OF 4 THE VIEW THAT IT IS NOT THE CASE OF THE AO THAT THE AMOUNT RECEIVED BY THE ASSESSEE IS IN THE NATURE OF ACCOMMODATION ENTRY. I N ORDER TO ARRIVE AT SUCH A CONCLUSION, THE DEPARTMENT HAS TO BE IN POSS ESSION OF SUFFICIENT AND ADEQUATE MATERIAL. IT IS NOTED THAT ASSESSEE HA S RECEIVED THESE AMOUNTS FROM HIS FRIEND, SH. BABU JEETHANI. THE ASS ESSEE HAD ALSO SUBMITTED THE PROOF OF IDENTITY OF THE LENDER AS WE LL AS THE COPY OF CONFIRMATIONS, WHICH ITSELF ESTABLISH THE EXISTENCE OF THE LENDER AND WHICH HAS NOT BEEN DOUBTED BY THE AO AS WELL AS THE LD. CIT(A). THUS, THE GENUINENESS OF THE TRANSACTIONS GETS ESTABLISHED TH ROUGH THE EVIDENCES SUBMITTED BY THE ASSESSEE. TO SUPPORT THIS VIEW, I DRAW MY SUPPORT FROM THE DECISION OF THE ITAT, MUMBAI BENCH IN THE CASE OF ACIT VS. CALVIN PROPERTIES, IN ITA NO. 6561, 6562 & 6564/MUM/2017 D ATED 3.4.2019 WHEREIN IT HAS BEEN HELD AS UNDER:- '15. IN THIS CASE, THE CREDITWORTHINESS OF THE INVESTORS EVEN IF IS NOT PROVED, EVEN THEN IT WILL NOT AUTOMATICALLY GIVE LICENSE TO THE ASSESSING AUTHORITY TO MAKE ADDITIONS IN THE HANDS OF THE RECIPIENT U/S 68, UNLESS THAT IS PROVED THAT IT IS THE UNEXPLAINED AND UNACCOUNTED MONEY OF THE ASSESSEE WHICH HAS BEEN INTRODUCED IN ITS BOOKS OF ACCOUNT IN THE NAME OF BOGUS/NON-EXISTENT ENTITIES. IN THE INSTANT CASE, THE AO HAD NOT MADE ANY DENT ON THESE LINES. ON THE OTHER HAND THE APPELLANT HAS FILED ALL THE DETAILS AND SUPPORTING DOCUMENTARY EVIDENCE TO PROVE THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF 1HESE THREE UNSECURED LOAN PARTIES. 16. MOREOVER, NO NEW FACTS OR CONTRARY JUDGMENTS HAVE BEEN BROUGHT ON RECORD BEFORE US IN ORDER TO CONTROVERT OR REBUT THE FINDINGS SO RECORDED BY LD CIT (A). THEREFORE, THERE ARE NO REASONS FOR US TO INTERFERE INTO OR DEVIATE FROM THE FINDINGS RECORDED BY THE LD. CIT 5 (A). HENCE, WE ARE OF THE CONSIDERED VIEW THAT THE FINDINGS SO RECORDED BY THE LD. CIT (A) ARE JUDICIOUS AND ARE WELL REASONED. RESULTANTLY, THESE GROUND RAISED BY THE REVENUE STANDS DISMISSED. ' 5.1 IT IS ALSO AN UNDISPUTED FACT THAT THE AMOUNT H AS BEEN RECEIVED THROUGH PROPER BANKING CHANNELS AND FOR ESTABLISHIN G THE AFORESAID FACT, THE ASSESSEE HAD ALSO SUBMITTED THE COPY OF BANK ST ATEMENTS. BY SUBMITTING THE AFORESAID EVIDENCES AND EXPLANATIONS , IN MY VIEW, THE ASSESSEE HAS DISCHARGED HIS INITIAL ONUS FOR DISCLO SING THE IDENTITY OF THE LOAN PROVIDER BY SUBMITTING THE COPY OF THE PASSPOR T, CONFIRMATIONS, COPY OF RESIDENT IDENTITY CARD OF SH. BABU JETHANI. NOW THE ONUS SHIFTS ON TO THE DEPARTMENT TO CONDUCT FURTHER ENQUIRIES WITH RE SPECT TO THE UNSECURE LOAN AND ESTABLISH THAT WHY ASSESSEE'S CASE CANNOT BE ACCEPTED. HOWEVER, IT IS SETTLED LAW THAT WHERE THE ASSESSEE HAD LED EVIDENCES IN SUPPORT OF THE IDENTITY OF THE THIRD PARTY AND HIS CAPABILITY THE INITIAL BURDEN WHICH LIES UPON HIM STAND DISCHARGED. IT WIL L NOT BEFORE THE ASSESSEE THEREAFTER TO EXPLAIN FURTHER HOW OR IN WH AT CIRCUMSTANCES THE THIRD PARTY OBTAINED THE MONEY AND HOW OR WHY HE C AME TO MAKE A DEPOSIT OF THE SAME WITH THE ASSESSEE. IN SUCH A SI TUATION THE BURDEN WILL SHIFT ON TO THE DEPARTMENT TO SHOW WHY THE ASSESSEE 'S CASE CANNOT BE ACCEPTED AND WHY IT MUST BE HELD THAT THE ENTRY, FO R PURPORTING TO BE IN THE NAME OF A THIRD PARTY STILL REPRESENTS THE INCO ME OF THE ASSESSEE. THIS VIEW IS SUPPORTED BY THE DECISION OF THE HON'BLE D ELHI HIGH COURT IN THE CASE OF CIT VS. FAIR FINVEST LTD., REPORTED IN [201 3] 357 ITR 146, VIDE ORDER DATED 22.11.2012, WHEREIN IT WAS HELD AS UNDE R: '6. THIS COURT HAS CONSIDERED THE SUBMISSIONS OF TH E PARTIES. IN THIS CASE THE DISCUSSION BY THE CIT(A) WOULD REVEAL THAT THE ASSESSEE HAS FILED DOCUMENTS INCLUD ING CERTIFIED COPIES ISSUED BY THE REGISTRAR OF COMPANI ES IN RELATION TO THE SHARE APPLICATION, AFFIDAVITS OF TH E DIRECTORS, FORM 2 FILED WITH THE ROC BY SUCH APPLIC ANTS 6 CONFIRMATIONS BY THE APPLICANT FOR COMPANY'S SHARES , CERTIFICATES BY AUDITORS ETC. UNFORTUNATELY, THE AS SESSING OFFICER CHOSE TO BASE HIMSELF MERELY ON THE GENERAL INFERENCE TO BE DRAWN FROM THE READING OF THE INVESTIGATION REPORT AND THE STATEMENT OF MR. MAHES H GARG. TO ELEVATE THE INFERENCE WHICH CAN BE DRAWN O N THE BASIS OF READING OF SUCH MATERIAL 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 INTO THE MATTER BY, IF NECESSARY, INVOKING HIS POWERS UN DER SECTION 131 SUMMONING THE SHARE APPLICANTS OR DIRECTORS. NO EFFORT WAS MADE IN THAT REGARD. IN TH E ABSENCE OF ANY SUCH FINDING THAT THE MATERIAL DISCL OSED WAS UNTRUSTWORTHY OR LACKED CREDIBILITY THE ASSESSI NG OFFICER MERELY CONCLUDED ON THE BASIS OF ENQUIRY RE PORT, WHICH COLLECTED CERTAIN FACTS AND THE STATEMENTS OF MR. MAHESH GARG THAT THE INCOME SOUGHT TO BE ADDED FELL WITHIN THE DESCRIPTION OF SECTION 68. 7. HAVING REGARD TO THE ENTIRETY OF FACTS AND CIRCUMSTANCES, THE COURT IS SATISFIED THAT THE FIND ING OF THE TRIBUNAL IN THIS CASE ACCORDS WITH THE RATIO OF THE DECISION OF THE SUPREME COURT IN LOVELY EXPORTS (SUPRA) 8. THE DECISION IN THIS CASE IS BASED ON THE PECULI AR FACTS WHICH ATTRACT THE RATIO OF LOVELY EXPORTS (SU PRA). WHERE THE ASSESSEE ADDUCES EVIDENCE IN SUPPORT OF THE SHARE APPLICATION MONIES, IT IS OPEN TO THE ASSESSI NG OFFICER TO EXAMINE IT AND REJECT IT ON TENABLE GROU NDS. IN CASE HE WISHES TO RELY ON THE REPORT OF THE INVESTI GATION AUTHORITIES, SOME MEANINGFUL ENQUIRY OUGHT TO BE CONDUCTED BY HIM TO ESTABLISH A LINK BETWEEN THE 7 ASSESSEE AND THE ALLEGED HAWALA OPERATORS; SUCH A L INK WAS SHOWN TO BE PRESENT IN THE CASE OF NOVA PROMOTE RS & FINLEASE (P) LTD. (SUPRA) RELIED UPON BY THE REVE NUE. WE ARE THEREFORE NOT TO BE UNDERSTOOD TO CONVEY THA T IN ALL CASES OF SHARE CAPITAL ADDED UNDER SECTION 68, THE RATIO OF LOVELY EXPORTS (SUPRA) IS ATTRACTED, IRRES PECTIVE OF THE FACTS, EVIDENCE AND MATERIAL. NO SUBSTANTIAL QUESTION OF LAW ARISES. THE APPEAL IS ACCORDINGLY DISMISSED. 5.2 THUS WHERE IN A GIVEN CASE THE ASSESSEE FOR HIS PART PRODUCED THE CONFIRMATIONS AND IDENTITY PROOFS OF SH. BABU JETHA NI, WHICH WOULD BE SUFFICIENT FOR THE ASSESSEE TO DISCHARGE HIS INITIA L BURDEN. THEN IT WOULD BE FOR THE AO TO BRING MATERIAL IF HE WANTS TO NEGATE THE SAME. 6. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWING THE PRECEDENTS AS AFORESAID, THE ADDITION IN DISPUTE IS HEREBY DELETED BY ALLOWING THE GROUND NO. 7, AS ARGUED BY THE LD. COUNSEL FOR THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. THE ORDER PRONOUNCED ON 19.03.2020. SD/- [H.S. SIDHU] JUDICIAL MEMBER DATED:19-03-2020 SRB COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) ASST. REGISTRAR, 5. DR ITAT, NEW DELHI 8