M/s. ITO, New Delhi V. M/s. Malibu Finance & Investment Ltd., New Delhi

ITA 4900/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8075 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2004-2005
• Appeal Filed On: 30-12-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G S SAHOTA
• Assessee Lawyers: RAVI GUPTA
• Keywords: Reopening of assessment; Unexplained cash credit; Opportunity of being heard; Principle of natural justice; Set aside
• Section: 133(6); 195; 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH : E NEW DELHI) BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI K.D. RANJAN, ACCOUNTANT MEMBER I.T.A. NO.4900/DEL./2009 (ASSESSMENT YEAR : 2004-05) ITO, WARD 6(2), VS. M/S MALIBU FINANCE & INVESTMEN T LTD., NEW DELHI. (NOW KNOWN AS MAHAVIR CONCAST LTD.,) 143, JAGRITI ENCLAVE, NEW DELHI. (PAN/GIR NO.AAACM1730E) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAVI GUPTA, ADV. REVENUE BY : SHRI G.S. SAHOTA, SR.DR ORDER PER K.D. RANJAN, AM THIS APPEAL BY THE REVENUE FOR AY 2004-05 ARISES O UT OF ORDER OF CIT(A)-IX, NEW DELHI. 2. THE ONLY ISSUE FOR CONSIDERATION RELATES TO DELE TING THE ADDITION OF RS.9 LAKH MADE BY THE AO U/S 68 OF THE I.T. ACT, 1961. THE RELEVA NT GROUNDS OF APPEAL ARE REPRODUCED AS UNDER: 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) HAS DELETING THE ADDITION OF RS.9,00,000/ - MADE BY THE AO U/S 68 BEING THE BOGUS CASH CREDITS. 2.1 THE LD.CIT(A) IGNORED THE FACT THAT THE ASSESSE E DID NOT DISCHARGE THE ONUS OF PROVING THE CREDIT WORTHINESS OF THE CREDITORS AND GENUINENESS OF THE TRANSACTIONS. 3. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT T HE RETURN OF INCOME FILED ON 21.7.2004 ADMITTING AN INCOME OF RS.28,220/- WAS PR OCESSED U/S 143(1). LATER ON, THE AO RECEIVED INFORMATION FROM DIRECTOR OF INCOME-TAX (INV.), NEW DELHI THAT ASSESSEE ITA NO.4900/DEL./2009 (AY : 2004-05) 2 WAS BENEFICIARY OF ACCOMMODATION ENTRY FROM ENTRY P ROVIDER. ACCORDINGLY NOTICE U/S 148 WAS ISSUED AFTER RECORDING REASONS THEREFOR. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, LD. COUNSEL FOR THE ASSESSEE OBJECTED TO REOPENING OF ASSESSMENT U/S 148 OF THE ACT. THE OBJECTION RAISED BY THE ASSESSEE WAS DISPOSED OF BY AO VIDE LETTER DATED 31 .10.2007. THEREAFTER, THE AO REQUIRED THE ASSESSEE TO EXPLAIN THE ENTRIES ACCORD ING TO WHICH THE ASSESSEE HAD RECEIVED AN AMOUNT OF RS.3 LAKH EACH FROM THREE COMPANIES, N AMELY, M/S PRAKASH PUNIT COMMERCE & CONSULTANTS PVT. LTD.; M/S C.V. METAL PO WERS (HARYANA LTD.); AND M/S RABIK EXPORTS LTD. THE AO NOTED THAT THE MODUS OPE RANDI ADOPTED BY THE ASSESSEE COMPANY WAS THAT FIRST IT HANDED OVER CASH TO ENTRY OPERATORS, THE ENTRY OPERATORS AFTER DEPOSITING SAID CASH IN THE BANK ACCOUNT NOS.52364, 52363 & 52199 MAINTAINED IN THE NAME OF M/S PRAKASH PUNIT COMMERCE & CONSULTANTS PV T. LTD.; M/S C.V. METAL POWERS (HARYANA LTD.); AND M/S RABIK EXPORTS LTD. WITH COR PORATION BANK, PASCHIM VIHAR, NEW DELHI ISSUED CHEQUES IN THE NAME OF ABOVE PERSONS O F THE EQUAL AMOUNT. THE AO IN ORDER TO VERIFY THE FACTS ISSUED NOTICE U/S 133(6) TO THE SE PARTIES FROM WHOM THE ASSESSEE HAD STATED TO HAVE RECEIVED SHARE APPLICATION MONEY OF RS.9 LAKH. HOWEVER, THE SAID LETTERS WERE RECEIVED BACK FROM THE POSTAL AUTHORITIES WITH POSTAL REMARKS, NO SUCH PERSONS. THE AO, THEREFORE, CAME TO THE CONCLUSION THAT THE IDENTITY AND CAPACITY OF ABOVE COMPANIES REMAINED UNPROVED. THE AO WAS ALSO OF TH E VIEW THAT THE ENTRIES OF CREDIT WERE NOT BONA FIDE. HE, ACCORDINGLY CONFRONTED THE ASSESSEE VIDE SHOW-CAUSE NOTICE DATED 31.10.2007, BUT NO REPLY WAS RECEIVED IN SPIT E OF SUFFICIENT TIME AND OPPORTUNITY PROVIDED TO THE ASSESSEE. ACCORDINGLY, THE AO ADDE D THE AMOUNT OF RS.9 LAKH AS UNEXPLAINED CREDIT WITHIN THE MEANING OF SECTION 68 OF THE ACT. 5. BEFORE CIT(A), IT WAS SUBMITTED THAT ASSESSEE HA D FILED SHARE APPLICATION FORMS, BOARD RESOLUTION, AFFIDAVIT OF DIRECTORS, COPY OF A CKNOWLEDGMENT OF ITR FOR AYS 2005-06 & 06-07 AND CONFIRMED TWO TRANSACTION BY LETTER ALO NG WITH PAN. IT WAS SUBMITTED THAT DOCUMENTS FILED CLEARLY ESTABLISHED THE IDENTITY OF PERSONS AND ALSO THE GENUINENESS OF TRANSACTION OF SHARE APPLICATION MONEY RECEIVED. I T WAS ALSO SUBMITTED THAT ONCE IDENTITY OF SHAREHOLDER HAD BEEN ESTABLISHED, THE ASSESSEE H AD DISCHARGED ITS BURDEN AND NO ADDITION COULD BE MADE U/S 68 OF THE ACT. RELIANCE WAS PLACED ON SEVERAL DECISIONS IN ITA NO.4900/DEL./2009 (AY : 2004-05) 3 SUPPORT OF CONTENTION. IT WAS ALSO SUBMITTED AO HA D MADE REFERENCE TO THE REPORT OF DIT(INV.), NEW DELHI. THE IMPUGNED REPORT WAS NEVE R CONFRONTED TO THE ASSESSEE AT ANY STAGE OF ASSESSMENT. THEREFORE, THE RELIANCE WAS P LACED BY THE AO ON SUCH STATEMENT FOR MAKING THE ADDITION WITHOUT CONFRONTING THE SAME TO THE ASSESSEE AND WITHOUT ADEQUATE OPPORTUNITY OF CROSS-EXAMINATION FLOUTS OF THE PRIN CIPLES OF NATURAL JUSTICE AND, THEREFORE, THE ASSESSMENT MADE IS NOT LEGALLY SUSTAINABLE. TH E CIT(A), HOWEVER, NOTED THAT THE SHARE APPLICATION MONEY WAS RECEIVED FROM PRIVATE L IMITED COMPANIES WHICH WERE REGISTERED WITH THE REGISTRAR OF COMPANIES, GOVT. O F INDIA. THEREFORE, THE AO SHOULD HAVE MADE VERIFICATION FROM REGISTRAR OF COMPANIES, BANKS OF PARTY AND THE CONCERNED AO OF THE COMPANIES, WHO HAD INVESTED IN THE SHARES . ACCORDING TO THE CIT(A) , THE ASSESSEE HAD DISCHARGED THE ONUS PROVING THE IDENTI TY OF ALL THE SHAREHOLDERS AND, THEREFORE, NO ADVERSE INFERENCE COULD BE TAKEN IN THE HANDS OF THE ASSESSEE. THE CIT(A), THEREFORE, CAME TO THE CONCLUSION THAT AO HAD NOT B EEN ABLE TO PUT FORTH ANY MATERIAL IN ASSESSMENT PROCEEDINGS TO CONTROVERT THE CLAIM OF T HE ASSESSEE THAT THE IDENT6ITY AND THE CREDITWORTHINESS OF THE PERSONS WAS PROVED. SHE AC CORDINGLY DELETED THE ADDITION. 6. BEFORE US, THE LD.SR.DR HAS SUBMITTED THAT IT IS A CASE OF ENTRY OPERATORS WHO HAVE STATED BEFORE THE INV. WING THAT THEY HAD PROV IDED ENTRIES TO THE ASSESSEE. THE AO HAD SENT NOTICE U/S 133(6) WHICH HAD BEEN RECEIVED UNNERVED. THEREFORE, THE IDENTITY OF PERSONS HAD NOT BEEN ESTABLISHED. THE EVIDENCES FI LED ARE MERE PAPER DOCUMENTS. THEREFORE, NEITHER THE IDENTITY NOR THE CREDITWORTH INESS OF THE PERSONS HAVE BEEN PROVED. ACCORDINGLY, THE CIT(A) HAS ERRED IN DELETING THE A DDITION OF RS.9 LAKH. ON THE OTHER HAND, LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT AS SESSEE HAD FILED NECESSARY EVIDENCE TO PROVE THE IDENTITY AND CREDITWORTHINESS OF THE SHAR EHOLDERS AND HENCE NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE, IN VIEW OF THE D ECISION OF THE HONBLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS, 216 CTR 195 7. WE HAVE HEARD BOTH PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. FROM THE FACTS STATED ABOVE, IT IS CLEAR THAT IT IS A CASE OF ENTRY PROVIDER WHERE THE INFORMATION WAS RECEIVED FROM INV. WING OF THE DEPA RTMENT. THE AO HAD ISSUED NOTICE U/S 133(6) WHICH HAVE BEEN RECEIVED BACK UNSERVED W ITH POSTAL REMARK NO SUCH PERSON. IT HAS ALSO BEEN CONTENDED BY THE LD.COUNSEL FOR TH E ASSESSEE THAT THE REPORT OF INV. WING ITA NO.4900/DEL./2009 (AY : 2004-05) 4 WAS NOT CONFRONTED TO THE ASSESSEE. IN THE CASE OF LOVELY EXPORT (SUPRA), THE IDENTITY OF PERSONS WAS ESTABLISHED. HOWEVER, IN THE CASE OF A SSESSEE, THE NOTICES ISSUED U/S 133(6) HAVE BEEN RECEIVED UNSERVED. THE SHARE APPLICANT A S PER POSTAL AUTHORITIES ARE NON- EXISTENT AT THE ADDRESS GIVEN BY THE ASSESSEE. SIN CE THE IDENTITY OF SHARE APPLICANTS HAS NOT BEEN ESTABLISHED AND ASSESSEE HAD NOT BEEN CONF RONTED WITH THE REPORT OF DIT(INV.), WE FEEL IT PROPER TO SET ASIDE THE MATTER TO THE FI LE OF THE AO WITH THE DIRECTIONS TO CONFRONT THE ASSESSEE WITH THE REPORT OF THE DIT(IN V.). THE AO IS ALSO DIRECTED TO MAKE ENQUIRES IN THE MATTER SO AS TO FIND OUT THE TRUTH. THE ASSESSEE IS ALSO DIRECTED TO PRODUCE THE SHARE APPLICANTS FOR NECESSARY VERIFICATION. T HE AO WILL DECIDE THE ISSUE AFTER AFFORDING A REASONABLE OPPORTUNITY OF BEING HEARD. WE ACCORDINGLY SET ASIDE THE ORDER OF CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE AO WITH AFORESAID DIRECTIONS. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 9. ORDER PRONOUNCED IN OPEN COURT ON 02.03.2010 ON CLOSE OF THE HEARING. SD/- SD/- (C.L. SETHI) (K.D. RANJAN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: MARCH. 02, 2010. *SKB* COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A)-IX, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. AR/ITAT