ITO, New Delhi V. M/s Oriental International Coy Pvt. Ltd., New Delhi

ITA 4979/DEL/2010

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3594 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 05-04-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 12-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of cross examination; Assessment record
• Section: 143(3); 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI B.P. JAIN, ACCOUNTANT MEMBER ITA NO.4979/DEL/2010 ASSESSMENT YEAR 2007-08 ITO, WARD-13(4), ROOM NO.219, C.R. BUILDING, NEW DELHI. VS. ORIENTAL INTERNATIONAL COY PVT. LTD., CIT(A)-8/1A, VASANT VIHAR, NEW DELHI PAN: AAACO 1309F (APPELLANT) (RESPONDENT) REVENUE BY : SHRI RAJESH KUMAR, SR.D.R, ASSESSEE(S) BY : SHRI R.S. SINGHVI, C.A. AND SHRI SATYAJEET GOEL, C.A. / DATE OF HEARING : 13/04/2017 / DATE OF PRONOUNCEMENT: 28/04/2017 ORDER PER B.P. JAIN, ACCOUNTANT MEMBER 1. THE PRESENT APPEAL ARISES FROM THE ORDER DATED 02.0 8.2010 PASSED BY CIT(A) . THE ASSESSEE IS A COMPANY WHICH HAD FILED RETURN FO R YEAR 2007- 08 DECLARING A LOSS OF RS . 2,58,075/-. THE CASE OF THE ASSESSEE COMPANY WAS SELECTED FOR SCRUTINY ASSESSMENT AND VIDE ORDER DAT ED 31 . 12.2009, AN ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS FRAM ED . THE INCOME OF THE ASSESSEE WAS ASSESSED AT RS. 4,95,14 , 420/- AFTER MAKING ADDITION UNDER SECTION 68 OF THE ACT WITH RESPECT TO SHARE CAPITAL RECEIVED FROM FIVE COMPANIES AMOUNTING TO RS. 5 CRORES. 2. AGGRIEVED BY THE ORDER DATED 31 . 12.2009, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) AND VIDE IMPUGNED ORDER DA TED 02.08.2010, THE ITA NO.4979/DEL/2010 2 APPEAL OF THE ASSESSEE WAS PARTLY ALLOWED. THE ADDI TIONS W.R . T . SE : TION 68 OF THE ACT WERE DELETED BY THE CIT(A) . 3. THE REVENUE IS IN APPEAL BEFORE US AND HAS R AISED THE FOLLOWING GROUNDS OF APPEAL:- 1 . THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD . CIT(A) ERRED IN DELETING THE ADDITION OF RS . 5 , 00 , 00 , 000/- MADE U/S. 68 OF THE ACT , 1961 . 2 . THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD . CIT(A) ERRED IN IGNORING THE FACT THAT THE JUDGMENT OF THE HON ' BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS (P) LTD . 216 CTR 199 (SC) IS D I STINGUISHABLE FROM THE INSTANT CASE . 3 . THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) FAILED TO APPRECIATE THE FACTS THAT THE ASSESSEE CO MPANY FAILED TO PROVE PHYSICAL IDENTITY AND EXISTENCE OF THE SAID FOUR PARTIES FRO M WHOM ALLEGED SHARE APPLICATION MONEY OF RS . 3 . 70 CRORES SHOWN TO HAVE BEEN RECEIVED WHICH WAS NOT THE CASE CITED SUPRA . 4 . THAT ON THE FACTS AND C I RCUMSTANCES OF THE CASE AND IN LAW THE LD . CIT(A) HAS FAILED TO APPRECIATE THE FACT GIVEN IN WRITING WITH DOCUMENTARY EVIDENCE BY SHRI SURESH CHAND GARG, LEGAL DIRECTOR OF M/S CREAT IVE FINANCIAL SERVICES , FROM WHOM SHARE APPLICATION MONEY OF RS . 1 . 30 CRORES WAS SHOWN RECEIVED , THAT MIS CREATIVE FINANCIAL SERVICES P. LTD. HAVE NOT MADE A NY INVESTMENT IN THE SHARE CAPITAL OF M/S ORIENTAL INTERNATIONAL COMPANY P. LT D . DURING THE ASSESSMENT YEAR 2007 -08 OR EVEN EVER . 5 . ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW , THE LD . CIT(A) HAS FAILED TO APPRECIATE THE FACTS GIVEN IN WRITING WIT H DOCUMENTARY EVIDENCE BY SHRI SURESH CHAND GARG , LEGAL DIRECTOR OF M/S CREATIVE FINANCIAL SERVICES T HAT THE SAID COMPANY HAS MAINTAINED BANK ACCOUNT WITH CANAR A BANK , ASAF ALI ROAD , DELHI SINCE F . Y . 2001-02 AND HAS NOT OPENED ANY BANK ACCOUNT WITH CA NARA BANK, PUNJABI BAGH , NEW DELHI AND ORIENTAL BANK OF COMMERCE , PAHAR GANJ , NEW DELHI FROM WHICH THE ASSESSEE COMPANY SHOWN TO HAVE RECEIVED THE SAID AMOUNT OF RS . 1 . 30 CRORES BY WAY OF BANK DRAFT/PAY ORDERS . 6 . ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW , THE LD . CIT(A) HAS FAILED TO APPRECIATE THE FACTS GIVEN IN WRITING WIT H DOCUMENTARY EVIDENCE BY SHRI SURESH CHAND GARG , DIRECTOR OF M/S CREATIVE FINANCIAL SERVICES THAT TH E DOCUMENTS GIVEN BY THE ASSESSEE COMPANY IN REGARD T O M/S CREATIVE FINANCIAL SERVICES HAVE BEEN CREATED BY SOME UNAUTHORISED PER SONS FRAUDULENTLY WITH ILL MOTIVE. THE LEARNED CIT(A) ALSO FAILED TO APPRECIAT E THE FACTS GIVEN BY SHRI ITA NO.4979/DEL/2010 3 SURESH CHAND GARG THAT SIMILAR TYPE OF ILLEGAL AND FRAUDULENT TRANSACTIONS HAVE BEEN MADE IN THE NAME OF CREATIVE FINANCIAL SERVICE S FOR WHICH M/S CREATIVE FINANCIAL SERVICES IMMEDIATELY GIVEN PUBL I C NOTICE IN THE ENGLISH NEWS PAPER IN THE ECONOMIC TIMES DATED 27 . 12 . 2007 AND ALSO FILED FIR IN POLICE STATION , MANGOLPURI ON 5.5 . 2008 . 7 . THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD . CIT(A) ERRED IN STATING THAT SHRI SURESH CHAND GARG , DIRECTOR OF MIS CREATIVE FINANCIAL SERVICES P . LTD . WAS NOT CROSS-EXAMINED BECAUSE AMPLE OPPORTUNITIES WERE PROVIDED TO THE ASSESSEE COMPANY TO CROSS-EXAMINE S HRI SURESH CHAND GARG IN THE PRESENCE OF DIRECTOR OF THE ASSESSEE COMPANY BU T THE DIRECTOR OF THE ASSESSEE COMPANV NEVER ATTENDED . 4. THE ASSESSMENT RECORD WOULD REVEAL THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF DEVELOPM ENT OF REAL ESTATE. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE C OMPANY RECEIVED SHARE APPLICATION MONEY AMOUNTING TO RS. 5,58,60,00 0/- FROM 8 SHARE SUBSCRIBERS. THE ADDITION MADE BY THE AD WAS RS. 5 CRORES IN RESPECT OF SHARE APPLICATION MONEY PERTAINING TO FIVE PARTIES AS PER DETAILS BELOW:- M/S CREATIVE FINANCIAL SERVICES PVT. LTD. RS. 1,3 0,00,000/- M/S RAHUL FINLEASE PVT. LTD. RS. 80,00,000/- M/S SHRI NIWAS LEASING & FINANCE LTD. RS. 1 , 40,00,000/- M/S MEGHDHOOT EXPRESS PVT. LTD. RS. 1,00,00,000/- M/S. NITI HOUSING DEVELOPMENT & RS. 50,00,000/- FINANCE PVT. LTD. THE ASSESSEE HAS FURNISHED WITH RESPECT TO THE AFOR ESAID SHA R E SUBSCRIBERS THE SHARE APPLICATION FORM, CONF I RMAT I ON , BOA R D RESOLUT I ON, PAN CARD, ALLOTMENT LETTER, FINANCIAL STATEMENTS, B ANK STATEMENTS, AFFIDAVIT OF DIRECTOR ETC. 5. THE AO HAD ISSUED NOTICES UNDER SECTION 133(6) OF T HE ACT TO THE AFORESAID COMPANIES AND THE ASSESSEE WAS ASKED TO P RODUCE THE DIRECTORS OF THE SHARE SUBSCRIBERS FROM WHOM EITHER NO REPLY HAS BEEN RECEIVED OR NOTICES HAVE BEEN RECEIVED BACK . THE ASSESSEE COMPANY ITA NO.4979/DEL/2010 4 FAILED TO PRODUCE THE DIRECTORS OF THE FOUR SHARE S UBS C RIBER COMPAN I ES I . E. M/S RAHUL FINLEASE PVT. LTD. , SHRI NIWAS LEASING AND F I NANCE LTD . , MEGHDUT EXPRESS PVT. LTD. AND M/S NIT I HOUS I NG DEVELOPMENT AND FINANCE PVT. LTD. THE AO RELIED UPON THE STATEMENTS GIVEN BY SHRI MAHESH GARG, REKHA GARG AND VINOD GARG BEFORE THE A DIT STATING THAT THESE COMPANIES WERE INVOLVED IN PROVIDING ACCOMMOD ATION ENTRIES . ON THE SAID BASIS, THE SHARE CAPITAL AMOUNTING TO RS. 3 . 70 CRORES RECEIVED FROM THE AFORESAID FOUR COMPANIES WAS TREATED AS UN EXPLAINED CASH CREDITS UNDER SECTION 68 OF THE ACT . 6. WITH RESPECT TO ONE OF THE SHARE SUBSCRIBERS , M/S CREAT I VE F I NANC I AL SERVICES PRIVATE LIMITED, THE AO RECEIVED REPLY FRO M THE DIRECTOR SHRI SURESH CHAND GARG WHO CATEGORICALLY DENIED TO HAVE MADE ANY TRANSACTIONS WITH THE ASSESSEE COMPANY IN A . Y . 2007-08 . THE ASSESSEE REBUTTED THE SAID DENIAL BY SHRI SURESH CHAND GARG. THE AO WAS NOT IMPRESSED BY THE EXPLANATION GIVEN BY THE ASSESSEE AND MADE THE ADDITION OF RS. 1 . 30 CRORES IN THE HANDS OF THE ASSESSEE . 7. THE CIT(A) OBSERVED THAT THE EVIDENCE GIVEN BY THE ASSESSEE W I TH RESPECT TO M/S. CREATIVE FINANCIAL SERVICES PVT. LTD. HAS NOT BEEN REBUTTED BY THE AO. HE FURTHER OBSERVED THAT AS REG ARDS THE OTHER FOUR SHARE SUBSCRIBER COMPANIES, THE AO HAS NOT PROVIDED THE OPPORTUNITY OF CROSS EXAMINATION TO THE ASSESSEE. THE ADDITION WAS THEREFORE , DE L ETED BY THE CIT{A). 8. THE LD. DR WHILE RELYING UPON THE ORDER PASSED BY T HE AO SUBMITS THAT THE ADDITION MADE IN THE ASSESSMENT PROCEEDINGS SHO ULD BE UPHELD. THE ITA NO.4979/DEL/2010 5 LD. DR RELIED UPON THE JUDGMENTS PASSED BY THE DELH I H I GH COURT IN THE CASE OF CIT VS. NOVA PROMOTERS & FINLEASE (P) LTD. 342 ITR 169, CIT VS . NIPUN BUILDERS & DEVELOPERS PVT. LTD., ITA NO. 120 OF 2012, CIT VS. N . R. PORTFOLIO (P.) LTD., 263 CTR 456 TO SUPPORT THE SUB MISSIONS . 9. THE LD . AR ON THE OTHER HAND SUBMITS THAT THE ORDER PASSED BY THE AO IS AN OUTCOME OF SUSPICION AND THE RELIANCE PLACED UPO N MATER I AL COLLECTED BEHIND THE BACK OF THE ASSESSEE WITHOUT AFFORD I NG OPPORTUNITY OF CROSS EXAMINATION CANNOT BE USED AGAINST THE ASSESSEE . 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE JUDGMENTS RELIED UPON BY THE BOTH THE PARTIES . IN THE CASE OF MIS CREATIVE FINANCIAL SERVICES PVT. LTD., THE ASSESSEE HAS SUBMITTED BEFO RE THE AO THAT SH. SURESH CHAND GARG, WHO HAS DENIED ON BEHALF OF THE COMPANY TO HAVE MADE ANY TRANSACTION WITH THE ASSESSEE COMPANY WAS NOT A DIRECTOR OF THE SHARE SUBSCRIBER COMPANY WHEN THE SHARE CAPITAL WAS SUBSCR I BED. THE ASSESSEE HAS GIVEN PARTICULARS OF . ALL THE DIRECTORS OF THE AFORESA I D COMPANY SINCE ITS INCORPORATION VIDE LETTER DATED 3 0 . 12 . 2009 . THE MASTER DETAILS AVAILABLE FROM THE ROC ALSO CLARIFIE S THAT THE SAID SH. SURESH CHAND GARG WAS NEITHER THE PROMOTER NOR THE ORIGINA L DIRECTOR . THE SHARE APPLICATION MONEY WAS INVESTED ON THE BAS IS OF THE RESOLUTION OF BOARD OF DIRECTORS OF THE AFORESAID COMPANY. IN THE SAID RESOLUT I ON , SH. DEEPAK CHANGIA WAS AUTHORIZED TO EXECUTE DOCUME NTS FOR THE PURPOSE OF SUBSCRIPTION TO SHARE CAPITAL . IT IS RELEVANT TO NOTE T HAT SH . DEEPAK CHANGIA WAS THE DIRECTOR OF THE COMPANY FROM THE YEAR 2003 AND THEREAFTER . THE SAID FACTS HAVE NOT BEEN REBUTTED BY THE AD. MOREOVER, THE AUTHORIZED REPRESENTATIVE OF THE ASSE SSEE WAS DEN I ED THE OPPORTUNITY TO CROSS EXAMINE SH. SURESH CHAND GARG . THE RELIANCE ITA NO.4979/DEL/2010 6 PLACED BY THE AO ON THE STATEMENT OF SH. SURESH CHA ND GARG IN THE ABSENCE OF CROSS EXAMINATION IS INCORRECT . THE LAW WITH RESPECT TO CROSS EXAMINATION IS WELL SETTLED IN VIEW OF THE JUDGMENT PASSED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. SMC BROKERS LTD. 288 ITR 245. THE SAID STATEMENT CANNOT BE USED AGAINST THE ASSESSEE COMPANY. 11. THE ASSESSEE IN THE PRESENT CASE, HAS DISCHARGED IT S ONUS BY PRODUCING ALL THE DOCUMENTS SHOWING THE GENUINENESS, CREDITWO RTHINESS AND IDENTITY OF THE SHARE SUBSCRIBER . THE AD HAS NOT PRODUCED ANYTH I NG ON RECORD TO SHOW HOW THE SHARE APPLICATION MONEY WAS TA I NTED MONEY OF THE ASSESSEE COMPANY WHICH WAS ROUTED THROUGH THE S HARE SUBSCRIBER COMPANY. THE HON'BLE DELHI HIGH COURT IN THE CASE O F CIT VS . D I VINE LEASING AND FINANCE LTD., 299 ITR 268, OBSERVED THA T IF THE AO FA I LS TO UNEARTH ANY WRONG OR ILLEGAL DEALINGS , HE CANNOT ADHERE TO HIS SUSP I CION AND TREAT THE SUBSCRIBED CAPITAL AS UNDISCLOSED INC OME OF THE COMPANY. IT IS TO BE FURTHER NOTED THAT MERE DENIAL BY SH. S URESH CHAND GARG WOULD NOT I PSO FACTO LEAD TO THE CONCLUSION THAT THE TRANSACTI ON WAS HIT BY SECTION 68 OF THE ACT . WE THEREFORE UPHOLD THE DELETION OF ADDITION WITH RESPECT TO THE SHARE SUBSCRIBERS M/S CREATIVE FINANCIAL SE R VICES PVT. LTD. 12. WITH RESPECT TO THE OTHER FOUR COMPANIES, THE AD HA S SOLELY RELIED UPON THE STATEMENTS RECORDED OF SH. MAHESH GARG, MS. REK HA GARG, AND SH. VINOD GARG TO THE ADIT NEW DELHI . THOUGH THE STATEMENTS WERE TAKEN IN 2003, THEY WERE SOUGHT TO BE RELIED BY THE DEPARTME NT IN A.Y. 2007-08. THE ASSESSEE, DESPITE REQUESTS WAS NOT GIVEN BY THE OPPORTUNITY TO CROSS EXAMINE THE AFORESAID THREE PERSONS WHOSE STATEMENT WERE RELIED UPON ITA NO.4979/DEL/2010 7 BY THE DEPARTMENT. MOREOVER, THE ASSESSEE HAS FURNI SHED THE COPIES OF SHARE APPLICATION FORMS, PAN, BANK DETAILS, CONFIRM ATION, ANNUAL RETURNS OF THE SHARE SUBSCRIBER COMPANIES. IN VIEW OF THE FACT , THAT THE ASSESSEE HAS PRODUCED ALL THE REQUISITE DOCUMENTS TO PROVE T HE AUTHENTICITY OF THE SHARE APPLICATION MONEY AND ALSO THE FACT THAT THE ASSESSEE WAS DENIED THE OPPORTUNITY TO CROSS EXAMINE THE AFORESA ID THREE PERSONS ON THE BASIS OF WHOSE STATEMENTS THE ADDITIONS WERE MA DE IN THE HANDS OF THE ASSESSEE, WE UPHOLD THE ORDER OF CIT(A) IN DELETING THE SAID ADDITION . THE JUDGMENTS RELIED UPON BY THE LD. DR WERE IN DIF FERENT FACTS AND CIRCUMSTANCES. IN THE PRESENT CASE, THERE HAS BEEN A SPECIFIC DENIAL BY THE AD TO PERMIT THE ASSESSEE COMPANY TO CROSS EXAM INE THE WITNESSES USED AGAINST IT. 13. IN VIEW THEREOF, THE GROUNDS RAISED BY THE DEPARTME NT ARE DISMISSED. 14. THUS APPEAL OF THE REVENUE IN ITA NO.4979/D/201 0 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY 28 TH APRIL, 2017 SD/- SD/- (I.C. SUDHIR) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 28/04/2017 PRABHAT KUMAR KESARWANI, SR.P.S. COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(APPEALS) 5.DR: ITAT ASSTT. REGISTRAR, ITAT, NEW DELHI