ITO, New Delhi V. M/s. Abhyansh Land & Properties (P) Ltd., New Delhi

ITA 4854/DEL/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7804 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 26-04-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 03-11-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K UPADHYAYE
• Keywords: Unexplained cash credit; Speculation loss
• Section: 133(6); 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A: NEW DELHI BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER AND SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER ITA NO. 4854/DEL/2011 ASSESSMENT YEAR: 2008-2009 ITO, WARD 1(1), ROOM NO. 398B, C.R. BLDG., I.P. ESTATE, NEW DELHI. VS. ABHYANSH LAND & PROPERTIES (P) LTD., 56B, GF, MADAN PARK, NEW DELHI. AAGCA3553M (APPELLANT) (RESPONDENT) APPELLANT BY : SH. S.K. UPADHYAYE, SR. DR RESPONDENT BY : NONE O R D E R PER S.V. MEHROTRA, A.M. THIS APPEAL IS FILED BY THE DEPARTMENT. IT IS DIR ECTED AGAINST THE ORDER OF LD. CIT(A) DATED 30.08.2011 FOR A.Y. 2008-09. 2. THE ASSESSEE COMPANY IN THE RELEVANT ASSESSMENT YEAR WAS ENGAGED IN THE BUSINESS OF TRADING IN SHARES. THE ASSESSEE HAD FILED RETURN OF INCOME DECLARING INCOME/LOSS AT NIL. THE ASSESSMENT WAS COMPLETED AT A TOTAL INCOME OF RS. 55 LAKHS BY MAKI NG AN ADDITION IN RESPECT OF CASH CREDITS U/S 68 OF THE ACT. FURTHER , THE ASSESSING OFFICER HAD DISALLOWED THE ASSESSEES CLAIM OF TREATING COS T OF SALE OF SHARES SOLD AT RS. 30,45,643/- AND HAD MADE AN ADDITION OF RS. 5,71,429/- ON THIS COUNT. 3. LD. CIT(A) ALLOWED THE ASSESSEES APPEAL. ITA NO. 4854/D/2011 2 4. BEING AGGRIEVED WITH THE ORDER OF LD. CIT(A), DE PARTMENT IS IN APPEAL BEFORE US AND HAS TAKEN FOLLOWING GROUNDS OF APPEAL : - 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS. 55 LAKH MADE U/S 68 OF THE I.T. ACT ON A/C OF UNEXPLAINED CASH CREDITS. II) THE LD. CIT(A) HAS ERRED IN APPLYING THE JUDGEMENT OF THE HONBLE SC IN THE CASE OF M/S LOVELY EXPORT TO THE FACTS OF THIS CASE AS FOLLOWS WHEN IT IS PRIMA FACIE CLEAR THAT THE IDENTITY OF THE SHAREHOLDERS IS NOT ESTABLISHED, PARTICULARLY WHEN THE SUBSCRIBERS OF SHARE CAPITAL DO NOT EXIST AT THE GIVEN ADDRESSES AND THESE HAVE NOT BEEN PRODUCED FOR VERIFICATION EITHER BEFORE THE AO OR EVEN BEFORE LD. CIT(A). III) THE LD. CIT HAS INTER-ALIA NOT APPRECIATED THE FACT THAT REPEATED NOTICES SENT ON THE ADDRESSES OF THE ALLEGED SUBSCRIBERS HAVING COME BACK FORM A GOVERNMENT AGENCY I.E. THE POSTMAN WITH THE REPORT THAT THERE IS NO SUCH PERSON AT THESE ADDRESSES, GOES TO SHOW THAT THE IDENTITY OF THESE PERSONS IS NOT GENUINE. IV) THE LD.CIT(A) HAS ALSO NOT APPRECIATED AS TO WHY SUDDENLY NEARLY ALL THE SUBSCRIBERS OF SHARES OF THE ASSESSEE COMPANY WOULD SHIFT THEIR ADDRESS TO A DIFFERENT PLACE. V) THE LD. CIT(A) HAS IGNORED THE FACT THAT WHEN SUMMONS ARE ISSUED TO INDEPENDENT SUBSCRIBERS, IT IS NOT NORMAL FOR ALL THESE INDEPENDENT SUBSCRIBERS TO CHOOSE NOT TO APPEAR BEFORE THE AO BUT APPROACH THE ASSESSEE AND SEND CONFIRMATIONS TO THE ASSESSEE FOR FILING THE SAME WITH THE AO EVEN WHEN THE SUMMONS COULD NOT BE SERVED AS THE SUBSCRIBERS DO NOT EXIST AT THE GIVEN ADDRESSES AND THAT THESE CIRCUMSTANCES INDICATE THAT THESE SUBSCRIBERS ARE NOT GENUINE AND ARE ACTING UNDER THE DIRECTIONS OF THE ASSESSEE AS NAME LENDERS ONLY WILL DO. VI) THE LD. CIT(A) HAS IGNORED THAT A PAPER IDENTITY CREATED BY GETTING REGISTRATION FROM ROC, WHO DO NOT CARRY OUT ANY VERIFICATION OF ACTUAL EXISTENCE/GENUINENESS OF THE ITA NO. 4854/D/2011 3 COMPANIES, CREATING DOCUMENTS LIKE SHARE APPLICATIONS FORMS AND SHARE ALLOTMENT FORMS CANNOT GET PRECEDENCE OVER THE REPORT OF THE POSTMAN WHICH IS A GOVERNMENT AGENCY, GIVEN AFTER PHYSICALLY VISITING THE GIVEN ADDRESSES, THAT THESE PERSONS DO NOT EXIST AT THE GIVEN ADDRESSES. 2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS. 5,71,429/- MADE ON A/C OF UNEXPLAINED EXPENSE. II) THE LD. CIT(A) HAS ERRED IN DELETING THE DISAL LOWANCE IGNORING THE LEGAL POSITION THAT THE DISALLOWANCE WAS LIABLE TO BE UPHELD AS SPECULATION LOSS. 3. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIG HT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUNDS OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 5. BRIEF FACTS APROPOS GROUND NO. 1 ARE THAT ASSESS EE HAD RECEIVED RS. 57 LAKHS AS SHARE APPLICATION MONEY OUT OF WHICH SH ARES WORTH RS. 50 LAKHS WERE ALLOTTED. THE DETAILS OF PERSONS WHO HA D GIVEN SHARE APPLICATION MONEY WERE AS UNDER: - 1. M/S D.K. BUILDWELL PRIVATE LIMITED RS. 5,00 ,000/- 2. M/S CHOTTI LEASING & FINANCE P. LIMITED RS. 9, 00,000/- 3. M/S RAMUKA COMMERCIAL P. LIMITED RS. 5,00,000 /- 4. M/S ZIGMA TELECOM PRIVATE LIMITED RS. 5,00,00 0/- 5. M/S ENPOL PRIVATE LIMITED RS. 10,00,000/- 6. M/S MASTERO MARKETING PRIVATE LIMITED RS. 10,00, 000/- 7. M/S DIGNITY FINVEST PRIVATE LIMITED RS. 6,00, 000/- 8. M/S UNITED BUILDMART PRIVATE LIMITED RS. 5,00 ,000/- 9. MS. MONIKA BANSAL RS. 1,00,000/- 10.MS. NIRMALA BANSAL RS. 1,00,000 /- TOTAL RS. 57,00,000/- 6. THE ASSESSEE FILED CONFIRMATION OF THE MONEY INV ESTED BY MS. MONIKA BANSAL AND MS. NIRMALA BANSAL WHO WERE THE DIRECTOR S OF THE COMPANY. THE AO, IN ORDER TO VERIFY THE IDENTITY OF THE SUBS CRIBERS, THE CREDIT WORTHINESS OF THE SUBSCRIBERS AND THE GENUINENESS O F THE TRANSACTION, ISSUED NOTICE U/S 133(6) OF THE ACT AT THE ADDRESSE S PROVIDED BY THE ITA NO. 4854/D/2011 4 ASSESSEE. THE NOTICES SENT TO PRIVATE LIMITED COMP ANIES (8 OF THE ABOVE SUBSCRIBERS), CAME BACK WITH THE REMARK OF THE POST AL DEPARTMENT AS NO SUCH PERSON, NO COMPLETE ADDRESS AND LEFT. TH E AO AGAIN ISSUED SUMMONS WHICH WERE RETURNED BACK UN-SERVED WITH THE SAME REMARK. WHEN THE ASSESSEE WAS CONFRONTED WITH THESE DEVELOP MENTS, IT PROVIDED NEW ADDRESSES FOR FOLLOWING SIX COMPANIES: - 1. M/S D.K. BUILDWELL PRIVATE LIMITED 2. M/S CHOTTI LEASING & FINANCE PRIVATE LIMITED 3. M/S ENPOL PRIVATE LIMITED 4. M/S MASTERO MARKETING PRIVATE LIMITED 5. M/S DIGNITY FINVEST PRIVATE LIMITED 6. M/S UNITED BUILDMART PRIVATE LIMITED 7. THE AO AGAIN ISSUED SUMMONS U/S 131 WHICH WERE R ETURNED UN- SERVED IN RESPECT OF FOUR COMPANIES. HOWEVER, THE REPLY OF TWO OF THE COMPANIES VIZ. M/S UNITED BUILDMARTPVT. LTD. AND M/ S MASTERO MARKETING P. LTD. WERE FILED THROUGH IN DAK, BUT NONE APPEARE D AS PER THE DIRECTIONS OF THE SUMMONS ISSUED. THE AO AFTER CONSIDERING THE ASSESSEES SUBMISSIONS MADE AN ADDITION OF RS. 55 LAKHS. 8. LD. CIT(A) DELETED THE ADDITION, INTER-ALIA, FOL LOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. M/S LO VELY EXPORTS PVT. LTD., 216 CTR 195 AND ALSO KEEPING IN VIEW THE EVIDENCES ON RECORD IN THE FORM OF ROC REGISTRATION, BANK STATEMENT ETC. 9. LD. DR REFERRED TO THE ASSESSMENT ORDER AND POIN TED OUT THAT ONE OF THE PARTY WAS M/S MASTERO MARKETING PVT. LTD. FROM WHICH ASSESSEE COMPANY HAD ALLEGEDLY RECEIVED SHARE APPLICATION MO NEY AMOUNTING TO RS. 10 LAKHS. HE REFERRED TO THE DECISION OF HONBLE D ELHI HIGH COURT IN THE CASE OF CIT VS. NOVA PROMOTORS AND FINLEASE PVT. LTD., VIDE ITA NO. 342/2011 DATED 15.02.2012 AND POINTED OUT THAT THE HONBLE DELHI HIGH COURT HAS EXHAUSTIVELY CONSIDERED THE ISSUE REGARDI NG SHARE APPLICATION MONEY IN CASE OF PRIVATE LIMITED COMPANY AND HAS HE LD THAT ALLEGED SHARE APPLICATION MONEY HAD RIGHTLY BEEN ADDED U/S 68 OF THE INCOME TAX ACT. ITA NO. 4854/D/2011 5 HE REFERRED TO PARA 17 AT PAGE 13 OF THE SAID DECIS ION AND POINTED OUT THAT IN THAT CASE ALSO ONE OF THE PARTY FROM WHOM SHARE APPLICATION MONEY WAS M/S MASTERO MARKETING & ADVERTISING P. LTD. THEREFORE, PRESENT ISSUE IS TO BE EXAMINED IN THE LIGHT OF THE OBSERVATIONS MADE I N THE DECISION IN THE CASE OF NOVA PROMOTERS AND FINLEASE P. LTD. HE, TH EREFORE, SUBMITTED THAT THE MATTER MAY BE RESTORED BACK TO THE FILE OF LD. CIT(A) TO EXAMINE THE ISSUE AFRESH IN THE LIGHT OF THE DECISION OF THE HO NBLE DELHI HIGH COURT IN THE CASE OF M/S NOVA PROMOTERS & FINLEASE P. LTD. 10. LD. COUNSEL RELIED ON THE ORDER OF LD. CIT(A). 11. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORD OF THE CASE. 12. FROM THE FINDINGS OF THE AO, AS NOTED EARLIER, IT IS EVIDENT THAT SUMMONS ISSUED TO 8 OUT OF 10 SUBSCRIBERS TO THE SH ARE APPLICATION MONEY WERE NOT COMPLIED WITH. THE LD. CIT(A) DELETED THE ADDITION KEEPING IN VIEW, THE EVIDENCES ON RECORD IN THE FORM OF BOARD RESOLUTION OF SUBSCRIBERS COMPANY, APPLICATION RECEIVED FROM THE SUBSCRIBER COMPANIES FOR ISSUE OF SHARE OF THE COMPANY, FORM NO. 2 OF AL LOTMENT OF SHARES FILED WITH ROC COPY OF ANNUAL RETURN FILED WITH ROC ALONG WITH RECEIPT AND FORM NO. 20-B FOR THE RELEVANT YEAR IN WHICH LIST OF SHA REHOLDERS WERE SHOWN, BANK STATEMENT OF THE ASSESSEE COMPANY, ETC. AS NOT ED AT PAGE 13 OF HIS ORDER. THE HONBLE DELHI HIGH COURT HAS OBSERVED T HAT THESE EVIDENCES ARE AT BEST NEUTRAL BUT ALL ADJOINING CIRCUMSTANCES HAVE TO BE TAKEN INTO CONSIDERATION FOR DECIDING THE ISSUE. FURTHER, LD. CIT(A) HAS ALSO RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F CIT VS. LOVELY EXPORTS PVT. LTD. (SUPRA). THIS DECISION HAS ALSO BEEN CONSIDERED BY THE HONBLE DELHI HIGH COURT AND AFTER CONSIDERING THE FACTS OF THE SAID CASE, INTER-ALIA, THAT THOUGH AO HAD SUFFICIENT TIME TO C ARRY OUT THE EXAMINATION, HE DID NOT DO SO, BUT PUT FORTH AN EXCUSE THAT THE ASSESSEE WAS TAKING SEVERAL ADJOURNMENTS HELD THAT THE DECISION OF HON BLE SUPREME COURT WAS ITA NO. 4854/D/2011 6 DISTINGUISHABLE ON FACTS. IN THE PRESENT CASE ALSO THE FACTS ARE DISTINGUISHABLE INASMUCH AS THE SUMMONS ISSUED BY T HE AO RETURNED UN- SERVED EVEN AT THE NEW ADDRESSES FURNISHED BY THE A SSESSEE. UNDER SUCH CIRCUMSTANCES, WE ARE OF THE OPINION THAT THIS ISSU E NEEDS TO BE RESTORED BACK TO THE FILE OF LD. CIT(A) FOR BEING DECIDED DE NOVO PARTICULARLY BECAUSE ONE OF THE SUNDRY CREDITORS VIZ. MASTERO MARKETING ADVERTISING PVT. LTD. IS COMMON IN BOTH NOVA PROMOTERS & FINLEASE P. LTD. AND IN THE PRESENT CASE. ACCORDINGLY, THE ORDER OF LD. CIT(A) IS SET ASIDE AND THE ISSUE RESTORED TO THE FILE FOR FRESH ADJUDICATION IN THE LIGHT OF THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF NOVA PROMOT ERS (SUPRA). 13. IN THE RESULT, THIS GROUND IS ALLOWED FOR STATI STICAL PURPOSES. 14. BRIEF FACTS APROPOS GROUND NO. 2 THIS ISSUE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAD PURCHASED SHARES OF RS. 24,80,354/- AND MADE SALE O F SHARES OF RS. 25,75,549/- ALSO CLOSING BALANCE OF SHARES AS ON 31 .03.2008 WAS FOR RS. 6,140/-. HOWEVER, HE NOTICED THAT IN THE PROFIT AN D LOSS ACCOUNT THE ASSESSEE HAD SHOWN COST OF SALE OF SHARES AT RS. 30 ,45,643/-. THE ASSESSEE OFFERED NO EXPLANATION FOR CLAIMING COST O F SALE AT RS. 30,45,643/- WHEN ACTUAL COST OF SALE OF SHARES WAS RS. 24,74,21 4/- (24,80,354/- - 6,140/-). HE, THEREFORE, ADDED THE DIFFERENCE OF R S. 5,71,429/- IN THE TOTAL INCOME OF THE ASSESSEE AS UNEXPLAINED EXPENSES. AT THIS JUNCTURE, WE MAY OBSERVE THAT WHILE COMPUTING THE TOTAL INCOME, THE AO HAS NOT MENTIONED THIS AMOUNT IN THE COMPUTATION. BE THAT AS IT MAY, HE HAS MADE THE DISALLOWANCE IN THE BODY OF THE ORDER. LD. CIT (A) DELETED THE DISALLOWANCE, INTER-ALIA, OBSERVING THAT THE AO HAD MADE THE ADDITION MERELY ON MATHEMATICAL CALCULATION THAT THE COST OF SALE OF SHARES IS EQUAL TO THE PURCHASE OF SHARES LESS THE CLOSING STOCK. HOWEVER, HE DID NOT GO INTO THE DETAILS ON RECORD WHICH CLEARLY SHOWED THA T THE COST OF SALE OF SHARES ALSO INCLUDED THE NET LOSS OF RS. 5,71,429/- INCURRED BY THE ITA NO. 4854/D/2011 7 ASSESSEE ON ACCOUNT OF FUTURE AND OPTIONS. THIS AM OUNT WAS DEBITED UNDER THE HEAD COST OF SALES IN THE PROFIT AND LOS S ACCOUNT. 15. LD. DR RELIED ON THE ORDER OF AO. 16. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORD OF THE CASE. IT IS NOT DISPUTED THAT THE NET LOSS OF RS. 5,71,429/- INCURRED BY THE ASSESSEE ON ACCOUNT OF F UTURE AND OPTIONS HAD BEEN DEBITED UNDER THE HEAD COST OF SALES OF SHARE S IN THE PROFIT AND LOSS ACCOUNT. THEREFORE, LD. CIT(A) RIGHTLY DELETED TH E ADDITION. 17. IN THE RESULT, THIS GROUND IS DISMISSED. 18. IN THE RESULT, THE DEPARTMENTAL APPEAL IS PARTL Y ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 26.04.2012 SD/- SD/- (U.B.S. BEDI) JUDICIAL MEMBER (S.V. MEHROTRA) ACCOUNTANT MEMBER DATED: 26.04.2012 *KAVITA COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI. TRUE COPY BY ORDER DEPUTY REGISTRAR