Basic Clothing Pvt. Ltd., New Delhi V. ITO, Ward- 4(2), New Delhi

ITA 5089/DEL/2018

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9998 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 24-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Reassessment proceedings
• Section: 133(6); 68; 148; 139

Judgement Text

ITA NO. 5089/DEL/2018 A.Y. 2009-10 BASIC CLOTHING PVT. LTD. 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: A, NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SMT. BEENA A PILLAI, JUDICIAL MEMBER ITA NO. 5089/DEL/2018 AY: 2009-10 BASIC CLOTHING PVT. LTD. K-55, UDYOG NAGAR, PEERAGARHI, NEW DELHI. PAN NO. AAECM0177D VS . ITO WARD 4(2), NEW DELHI. (APPELLANT) (RESPONDE NT) ASSESSEE BY : SMT. PRELATA BANSAL, SR. ADV. SHRI PRANSHU SINGHAL, CA REVENUE BY : SHRI SRIDHAR DORA, SR. DR DATE OF HEARING : 05/12/2018 DATE OF PRONOUNCEMENT : 11/12/2018 ORDER PER BEENA A PILLAI, JUDICIAL MEMBER PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAINST O RDER DATED 13/04/18 PASSED BY LD. CIT (A)-2, NEW DELHI F OR ASSESSMENT YEAR 2009-10 ON FOLLOWING GROUNDS OF APP EAL: 1. THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS I N CONFIRMING THE ORDER PASSED BY THE ASSESSING OFFICE R MAKING ADDITION OF RS. 50,90,000/- TO THE INCOME OF ASSESSEE. 2. THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADD ITION OF RS. 50 LAKHS MADE BY THE ASSESSING OFFICER U/S 68 O F THE ACT IGNORING THE MATERIAL PRODUCED BY THE ASSESSEE AND THE EVIDENCES DIRECTLY PRODUCED BY THE SHAREHOLDER COMPANIES M/S VIRGIN CAPITAL SERVICES PVT. LTD. AND M/S MANI MALA DELHI PROPERTIES PVT. LTD. IN PURSUANCE T O NOTICES U/S 133(6) OF THE ACT. ITA NO. 5089/DEL/2018 A.Y. 2009-10 BASIC CLOTHING PVT. LTD. 2 3. THAT THE LD. CIT(A) AND THE ASSESSING OFFICER HAVE ERRED IN LAW AND ON FACTS IN HOLDING THAT THE ASSESSEE HAD N OT ESTABLISHED GENUINENESS OF THE SHARE CAPITAL OF RS. 50 LAKH SUBSCRIBED BY M/S VIRGIN CAPITAL SERVICES PVT. LTD. AND M/S MANI MALA DELHI PROPERTIES PVT. LTD. 4. THAT THE LD.CIT(A) HAS ERRED IN HOLDING THAT THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE ALLOTTING SHARE CAPITAL TO THE TWO COMPANIES WERE SHAM. 5. THAT THE LD. ASSESSING OFFICER AND THE CIT(A) HAVE NOT BROUGHT ANY MATERIAL ON RECORD, INDEPENDENT OF THE INFORMATION RECEIVED FROM THE INVESTIGATION WING, T O PROVE THAT THE AMOUNT SUBSCRIBED BY WAY OF SHARE CAPITAL BY THE TWO COMPANIES WAS UNDISCLOSED INCOME OF THE ASSESSE E. 6. THAT THE ASSESSEE HAD DISCHARGED THE BURDEN LAID DO WN UPON HIM U/S 68 OF THE ACT BY ADDUCING THE EVIDENCE BEFORE THE AO AS REQUIRED BY HIM. EVEN THE SHARE SUBSCRIBERS HAD DIRECTLY ADDUCED THE EVIDENCES BEFO RE THE AO AS PER HIS DIRECTION. HENCE, THE BURDEN WAS SHI FTED ON THE DEPARTMENT TO PROVE THAT THE SHARE CAPITAL ISSU ED BY THE ASSESSEE TO THE TWO COMPANIES WERE NOT GENUINE. MERE INFORMATION FROM THE INVESTIGATION IS NOT SUFF ICIENT TO MAKE ADDITION TO THE INCOME OF ASSESSEE U/S 68 OF T HE ACT. 7. THAT THE ORDER PASSED BY THE CIT(A) IS PERVERSE WHE N HE IGNORED THE MATERIAL FACT THAT THE ASSESSEE WAS NOT CONFRONTED WITH THE INVESTIGATION CARRIED OUT BY TH E INVESTIGATION WING OR WAS GIVEN AN OPPORTUNITY TO C ROSS EXAMINE THE PERSONS WHOSE STATEMENTS WERE RECORDED BY THE INVESTIGATION WING. 8. THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS. 90,000/- MADE BY THE AO ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE FORM OF EXPENDITURE @1.8% OF RS. 50,000/-. 9. THAT THE LD. CIT(A) HAS ARBITRARILY CONFIRMED THE O RDER PASSED BY AO ON SURMISES AND CONJECTURES IGNORING A LL THE MATERIAL PRODUCED BY THE ASSESSEE AS WELL AS SHARE SUBSCRIBERS. HENCE THE ORDER PASSED BY CIT(A) IS P ERVERSE IN LAW AND ON FACTS. 10. THAT THE APPELLANT SEEKS LEAVE TO ADD, AMEND, ALTER , ABANDON OR SUBSTITUTE ANY OF THE ABOVE GROUNDS DURI NG THE HEARING OF THE APPEAL. ITA NO. 5089/DEL/2018 A.Y. 2009-10 BASIC CLOTHING PVT. LTD. 3 2. BRIEF FACTS OF THE CASE ARE AS UNDER: ASSESSEE FILED ITS RETURN OF INCOME ON 31/03/10 DEC LARING TOTAL INCOME OF RS.3,19,610/-, WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. THEREAFTER ON 16/03/16, LD.AO IS SUED NOTICE UNDER SECTION 148 OF THE ACT, REQUIRING ASSESSEE TO FILE RETURN FOR ASSESSMENT YEAR 2009-10. REASONS RECORDED FOR REOPE NING WERE PROVIDED TO ASSESSEE. SUBSEQUENTLY, ASSESSEE VIDE L ETTER DATED 28/06/16 REQUESTED LD.AO TO TREAT THE RETURN ORIGIN ALLY FILED UNDER SECTION 139 AS RETURN FILED, PURSUANT TO NOTI CE UNDER SECTION 148 OF THE ACT. ASSESSEE ALSO FILED OBJECTI ONS FOR REOPENING. 3. DURING REASSESSMENT PROCEEDINGS, LD.AO OBSERVED THAT SUBSEQUENT TO PROCESSING OF RETURN OF INCOME ORIGIN ALLY FILED BY ASSESSEE UNDER SECTION 143(1) OF THE ACT, INFORMATI ON WAS RECEIVED FROM INVESTIGATION WING ON 12/03/13, WHERE IN, DOCUMENTS WERE SEIZED PURSUANT TO SEARCH AT S.K. JA IN GROUP. SEIZED MATERIALS REVEALED THAT, ACCOMMODATION ENTRI ES IN FORM OF SHARE CAPITAL/PREMIUM/LOAN DURING FINANCIAL YEAR 20 08-09, WERE RECEIVED BY ASSESSEE AMOUNTING TO RS.50 LACS FROM T WO COMPANIES BY NAME VIRGIN CAPITAL SERVICES PVT. LTD. , AND MANI MALA DELHI PRO PVT. LTD., AMOUNTING TO RS.35 LACS A ND RS.15 LAKHS RESPECTIVELY. IT IS OBSERVED THAT LD.AO ISSUE D NOTICES UNDER SECTION 133(6) TO SAID COMPANIES, WHO HAD ALLEGED T O HAVE INVESTED TO SHARE CAPITAL OF ASSESSEE. 3.1 BE THAT AS IT MAY, LD. AO CALLED FOR DETAILS FR OM ASSESSEE IN RELATION TO ENTRIES ALLEGED TO BE SHARE CAPITAL IN HANDS OF ASSESSEE. ASSESSEE FILED ITS OBJECTIONS IN RESPECT OF REASSESSMENT, AND REQUESTED LD. AO TO PROVIDE COPIES OF CONFIRMAT IONS FILED BY ITA NO. 5089/DEL/2018 A.Y. 2009-10 BASIC CLOTHING PVT. LTD. 4 CREDITOR COMPANYIES. THE LD. AO WHILE DEALING WITH OTHER OBJECTIONS, REJECTED SUCH REQUEST OF ASSESSEE, BY O BSERVING THAT ONLY THOSE DOCUMENTS WHICH WOULD BE USED AGAINST AS SESSEE COULD BE PROVIDED. 3.2 THEREAFTER, LD. AO PROCEEDED TO DISCUSS UPON TH E INFORMATION RECEIVED FROM INVESTIGATION WING HAVING REGARD TO THE EVIDENCES SEIZED FROM SK JAIN GROUP. THE LD. AO AGA IN SHOW CAUSE ASSESSEE TO EXPLAIN CREDIT WITHIN THE MEANING OF SECTION 68 AND TO ESTABLISH IDENTITY, CREDITWORTHINESS AND MOS T IMPORTANTLY GENUINENESS OF TRANSACTIONS. ASSESSEE IN REPLY FILE D ITS COPIES OF ACCOUNTS PERTAINING TO FINANCIAL YEAR UNDER CONSIDE RATION, BANK STATEMENTS, INCOME TAX RETURNS, JUSTIFICATION OF SH ARE PREMIUM RECEIVED AND THE NATURE OF TRANSACTION. 4. LD.AO UPON PERUSAL OF DETAILS FILED BY ASSESSEE, WAS OF OPINION THAT, ASSESSEE HAS FAILED TO DISCHARGE BURD EN OF PROOF UNDER SECTION 68 OF THE ACT, BY NOT SUPPLYING ANY D ETAILS PERTAINING TO ALLEGED 2 COMPANIES, WHO HAVE FOUND T O HAVE INVESTED ALLEGED SHARE CAPITAL WITH ASSESSEE. HE, THUS, MADE ADDITION UNDER SECTION 68 OF THE ACT IN THE HANDS OF ASSESSEE TO THE EXTENT OF RS. 50 LACS BEING CRED ITED IN THE BOOKS OF ACCOUNT OF ASSESSEE. 5. AGGRIEVED BY ORDER OF LD. AO ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT (A). WHO CONFIRMED THE ORDER OF LD. AO. 6. AGGRIEVED BY THE ORDER OF LD. CIT (A) ASSESSEE I S IN APPEAL BEFORE US NOW. 7. LD. COUNSEL SUBMITS THAT, DURING FIRST APPELLATE PROCEEDINGS, ASSESSEE OBTAINED BY WAY OF RTI APPLIC ATION, CONFIRMATIONS FILED BY CREDITOR COMPANIES. SHE SUBM ITTED THAT, ITA NO. 5089/DEL/2018 A.Y. 2009-10 BASIC CLOTHING PVT. LTD. 5 ASSESSING OFFICER DID NOT CONSIDER AND VERIFY CONFI RMATION LETTERS FILED BY CREDITOR COMPANIES, WHEREIN, THEY HAVE CON FIRMED MONEY HAVING DEPOSITED WITH ASSESSEE TOWARDS SHARE APPLIC ATION. REFERRING TO PAGES 25-45 OF PAPER BOOK, LD. COUNSEL SUBMITTED THAT, ALL DETAILS HAVE BEEN FILED BY CREDITORS BEFO RE LD. AO IN RESPONSE TO NOTICE ISSUED UNDER SECTION 133(6) OF T HE ACT. 8. LD. COUNSEL SUBMITTED THAT ASSESSEE HAS THUS DIS CHARGED ONUS CAST UNDER SECTION 68 OF THE ACT AND, ADDITION MADE BY LD. AO U/S 68 IS NOT JUSTIFIED. 9. ON CONTRARY, LD. SR. DR SUBMITTED THAT ALL DETAI LS RELIED UPON BY LD. COUNSEL FOR ASSESSEE HAS BEEN OBTAINED BY ASSESSING OFFICER BY ISSUANCE OF NOTICE UNDER SECTION 133(6) OF THE ACT. SHE SUBMITTED, IT IS SURPRISING THAT ASSESSEE HAVING AC CEPTED SHARE APPLICATION MONEY FROM THESE CREDITORS, DO NOT POSS ESS ANY DETAILS, THAT COULD ESTABLISH THEIR IDENTITY, CREDI TWORTHINESS AND MOST IMPORTANTLY GENUINENESS OF TRANSACTION. 10. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SI DES IN LIGHT OF RECORDS PLACED BEFORE US. 10.1 DOCUMENTS RELIED UPON BY LD. COUNSEL PLACED IN PAPER BOOK REFERRED TO HEREIN ABOVE, HAS ADMITTEDLY NOT BEEN C ONSIDERED BY LD.AO. IT IS OBSERVED THAT, THESE DOCUMENTS WERE AV AILABLE WITH ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS. EV EN LD. CIT(A) FAILED TO CONSIDER THE SAME. AT THIS JUNCTUR E, WE ARE NOT IN A POSITION TO ACCEPT ARGUMENT OF LD. COUNSEL THAT, MANDATE UNDER SECTION 68 STANDS DISCHARGED BY ASSESSEE WITH CONFIRMATIONS HAVING RECEIVED FROM CREDITOR COMPANI ES BY LD.AO. SECTION 68 REQUIRES ASSESSEE TO FURNISH ALL NECESSA RY DETAILS REGARDING CREDIT ENTRIES IN BOOKS OF ACCOUNTS AND T O ESTABLISH ITA NO. 5089/DEL/2018 A.Y. 2009-10 BASIC CLOTHING PVT. LTD. 6 IDENTITY, CREDITWORTHINESS AND MOST IMPORTANTLY GEN UINENESS OF TRANSACTION BEFORE LD.AO DURING ASSESSMENT PROCEEDI NGS ASSESSEE HAS FAILED TO FURNISH ANYEVIDENCE/PROOF IN RELATION TO THE CREDITOR COMPANIES. FURTHER IN OUR CONSIDERED OPINION, LD.AO SHOULD HAVE CONSIDERED CONFIRMATIONS AND EVID ENCES RECEIVED FROM ALLEGED CREDITORS DURING ASSESSMENT P ROCEEDINGS. 11. WE ARE, THEREFORE, INCLINED TO SET ASIDE THIS I SSUE BACK TO LD.AO FOR DE NOVO CONSIDERATION, IN LIGHT OF CONFIRMATIONS/EVIDENCES RECEIVED FROM CREDITOR COMP ANIES, AS PER LAW. ASSESSING OFFICER IS TO TAKE ALL NECESSARY ST EPS TO VERIFY SUCH DETAILS, AND TO CALL FOR ANY OTHER DETAILS THAT MAY BE REQUIRED FOR PURPOSES OF VERIFYING CREDIT ENTRIES IN BOOKS OF AC COUNT OF ASSESSEE. ASSESSEE IS DIRECTED TO PLACE BEFORE LD.A O, ALL NECESSARY DETAILS/DOCUMENTS AS CALLED FOR, AND TO F ILE ALL ANY SUCH EVIDENCES THAT MAY BE REQUIRED IN ORDER TO EST ABLISH ITS CLAIM. NEEDLESS TO SAY THAT IF WITH THE HELP OF TH ESE EVIDENCES AND ANY INVESTIGATION UNDERTAKEN BY LD.AO, ALLEGED CREDIT ENTRIES STANDS EXPLAINED AS PER LAW, NO ADDITION IS TO BE M ADE IN THE HANDS OF ASSESSEE. ACCORDINGLY THE GROUNDS RAISED BY ASSESSEE STANDS A LLOWED FOR STATISTICAL PURPOSES. IN THE RESULT APPEAL FILED BY ASSESSEE STANDS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/12/2018 SD/- SD/- (G.D. AGRAWAL) ( BEENA A PILLAI) VICE PRESIDENT JUDIC IAL MEMBER DT. 11/12/2018 *KAVITA ARORA ITA NO. 5089/DEL/2018 A.Y. 2009-10 BASIC CLOTHING PVT. LTD. 7 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT - TRUE COPY - BY ORDER, ASSISTANT REGISTRAR ITAT DELHI BENCHES ITA NO. 5089/DEL/2018 A.Y. 2009-10 BASIC CLOTHING PVT. LTD. 8 DATE DRAFT DICTATED ON 06/12/2018 DRAFT PLACED BEFORE AUTHOR 06/12/2018 11/12/18 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 11/12 APPROVED DRAFT COMES TO THE SR.PS/PS 11/12 KEPT FOR PRONOUNCEMENT ON & ORDER UPLOADED ON : 11/12 FILE SENT TO THE BENCH CLERK 11/12 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.