NKS Financial Services Pvt. Ltd., Delhi V. ITO, New Delhi

ITA 5423/DEL/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6552 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 10-01-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 18-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAJ CHAWLA; Y K MADAN
• Keywords: Reopening of assessment; Unexplained cash credit; Accommodation entries; Reason to believe
• Section: 69C; 143(3); 147; 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 5423/DEL/2016 ASSESSMENT YEAR: 2007-08 M/S NKS FINANCIAL SERVICES VS. ITO, WARD 17(3), (P) LTD. NEW DELHI 38, FUNCTIONAL INDUSTRIAL ESTATE, PATPARGANJ, DELHI 110 092 (PAN: AAACN4011F) (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. Y.K. MADAN, CA & SH. RAJ CHAWLA, CA DEPARTMENT BY : SH. RAKESH KUMAR, SR. DR. ORDER THE ASSESSEE HAS FILED THE APPEAL AGAINST THE IMPU GNED ORDER DATED 29.7.2016 OF LD. CIT(A)-6, DELHI PERTAINING TO ASSESSMENT YEAR 2007-08. THE ASSESSEE HAS RAISED THE FOLLOWING GROU NDS:- 1. UNDER THE CIRCUMSTANCES & FACTS OF THE CASE, THE ORDER PASSED BY LD CIT (A) 6, NEW DELHI IS BAD IN LAW IN GENERAL. 2. THE LD CIT(A) HAS ERRED ON FACTS AND IN LAW UND ER THE CIRCUMSTANCES OF THE CASE BY DISMISSING THE ADDITIO NAL GROUNDS NO 1(I) TO 1(IY) IN THE ORDER PASSED VIDE APPEAL NO 650/14-15 DATED 29/07/2016. FOLLOWING ADDITIONAL GROUND WERE RAISED: (I) THE LD. AO HAS ERRED IN LAW & ON FACTS TO ISS UE NOTICE U/S 148 FOR AY 2007-08 WHEREAS INCOME BELIEVED TO HAVE ESCAPED ASSESSMENT 2 BY LD. AO RELATES TO ASSTT. YEAR 2006-07, THEREBY R ENDERS THE NOTICE U/S 148 AS BARRED BY TIME LIMITATION & VOID-AB-INITIO. (II) WITHOUT PREJUDICE TO ABOVE, ON FACTS AND UNDE R THE LAW, NOTICE U/S 148 ISSUED BY LD. AD IN THIS CASE IS ARBITRARY, UNJ UST, ILLEGAL ON THE SUBSTANCE OF THE MATTER ON WHICH REASON TO BELIEVE HAVE BEEN FRAMED BY LD. AO. (III) WITHOUT PREJUDICE TO ABOVE, CONSEQUENTLY THE IMPUGNED REASSESSMENT ORDER PASSED U/S 143(3)/147 DATED 27-0 2-2015 IS ILLEGAL, VOID-AB-INITIO & UNDER INVALID JURISDICTION ASSUMED BY LD. AO BEING BASED ON INVALID FOUNDATION OF 148 NOTICES AND THER EFORE DESERVES TO BE CANCELLED/QUASHED/SET ASIDE. (IV) THUS ADDITION OF RS 10 LACS ARE NOT SUSTAINED BEING ARISEN OUT OF INVALID & ILLEGAL ASSESSMENT ORDER. 3. THE LD. CIT (A) HAS ERRED IN LAW BY CONSIDERING THE CREDIT ENTRY APPEARING IN THE BANK STATEMENT OF ASSESSEE IN APRI L 2006 AS CASH CREDIT ENTRY IN THE BOOKS OF ACCOUNT OF ASSESSEE FOR THE A Y. 2007-08 WHICH IS AGAINST THE MANDATE OF PROVISION OF SECTION INCOME TAX ACT, 1961. 4. THE LD.CIT (A) HAS ERRED ON FACTS IN LAW BY NOT ADJUDICATING THE CASE ON MERITS WHEN ASSESSEE HAS DULY EXPLAINED THE SOURCE OF SHARE APPLICATION MONEY, IDENTITY OF THE APPLICANTS AND G ENUINENESS OF THE TRANSACTION. 5. THE CIT (A) HAS ERRED ON FACTS & UNDER THE LAW B Y UPHOLDING THE ADDITION OF RS 10 LACES AS SHARE APPLICATION MONEY FROM TWO APPLICANTS 3 IN F.Y 2005-06 UNDER THE DISGUISE OF SECTION 68 OF INCOME TAX ACT AS UNEXPLAINED CASH CREDIT BY ASSESSEE. 6. THE LD. CIT (A) HAS ERRED IN LAW ON FACTS BY UPH OLDING AN ADDITION OF RS 30,000/- AS 3% COMMISSION U/S 69C AS UNDISCLO SED INCOME ON THE UNEXPLAINED SHARE APPLICATION MONEY OF RS 10 LACS. 7. THE ASSESSEE CRAVES LEAVE TO ADD, ALTER OR DELET E ANY GROUND OF APPEAL DURING THE COURSE OF APPEAL PROCEEDINGS. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE FILED ITS RETURN OF INCOME ON 13.9.2007 DECLARING TOTAL INCOME OF RS. 1 ,17,438/-. THE CASE WAS ASSESSED U/S. 143(3) OF THE I.T. ACT AT RS. 1,1 7,438/- VIDE ORDER DATED 16.11.2009. AO OBSERVED THAT THE ASSESSEE COMPANY HAD RECEIVED ACCOMMODATION ENTRIES TO THE EXTENT OF RS. 10 LACS DURING THE FINANCIAL YEAR 2006-07 RELEVANT TO THE ASSESSMENT YEAR 2007-0 8 FROM THE BOGUS / PAPER COMPANY OF SH. SURENDER KUMAR JAIN GROUP OF C OMPANIES/ CASES, WHO ADMITTED TO BE MERE ENTRY OPERATORS AND STATED THAT HIS VARIOUS COMPANIES ARE USED FOR PROVIDING ACCOMMODATION ENTR IES ONLY AND THE ASSESSEE COMPANY WAS FOUND IN THE LIST OF BENEFICIA RIES OF SUCH ACCOMMODATION ENTRIES. ACCORDINGLY, THE CASE OF TH E ASSESSEE WAS THEREFORE, REOPENED U/S. 147 OF THE I.T. ACT, 1961 AND NOTICE U/S. 148 OF THE I.T. ACT, 1961 DATED 26/3/2014 WAS ISSUED AND S ERVED. IN RESPONSE TO THE SAME THE ASSESSEE VIDE LETTER DATED 4.4.2014 HA S SUBMITTED THE COPY OF THE RETURN ALREADY FILED ALONGWITH ITS ANNEXURES AN D THEREAFTER SUBMITTED OBJECTIONS ALSO AGAINST THE REOPENING OF ASSESSMENT U/S. 148 OF THE I.T. 4 ACT, 1961. THE OBJECTIONS WERE CONSIDERED AND DISP OSED OFF BY THE AO. AO HAS OBSERVED THAT UNDER THE PROVISION OF SECTION 68 OF THE ACT, WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS AN ASSESSEE, MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATI ON ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM, I N HIS OPINION THE SUM SO CREDITED MAY BE CHARGED TO INCOME AS INCOME OF T HE ASSESSEE OF THAT PREVIOUS YEAR. IN VIEW OF THE ABOVE, AO MADE THE A DDITION OF RS. 10 LACS AND FURTHER MADE THE ADDITION ON ACCOUNT OF COMMISS ION @ 3% FOR ARRANGING THE BOGUS TRANSACTION OF RS. 10 LACS, WH ICH WORKS OUT TO RS. 30,000/-. THE AO FINALIZED THE ASSESSMENT VIDE ORDE R DATED 27.2.2015 UNDER SECTION 143(3)/147 OF THE I.T. ACT, 1961 AT AN ASSESSED INCOME OF RS. 11,47,440/- AFTER MAKING ADDITION OF RS. 10,30, 000/-. 3. NOW THE ASSESSEE IS AGGRIEVED AGAINST THE IMPUGN ED ORDER AND FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 4. AT THE THRESHOLD, LD. COUNSEL OF THE ASSESSEE HA S ONLY PRESSED GROUND NO. 5 & 6 AND STATED THAT THE ISSUE/GROUND N O. 5 INVOLVED IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE ITAT, SM C BENCH, MUMBAI DECISION DATED 12.8.2016 PASSED IN ITA NOS. 4223 & 4224 (MUM) OF 2015 (AYRS. 2011-12) IN THE CASE OF SMT. MANASI MAH ENDRA PITKAR VS. ITO. IN THIS BEHALF, HE FILED THE COPY OF THE SAID DECISION AND REQUESTED THAT BY FOLLOWING THE SAME REASONING, THE ADDITION OF RS. 10 LACS IN DISPUTE MAY BE DELETED AND ACCORDINGLY, THE ADDITIO N OF RS. 30,000/- ON 5 ACCOUNT OF COMMISSION @3% ON THE ADDITION AMOUNT MAY ALSO BE DELETED. 5. ON THE CONTRARY, LD. SR. DR RELIED UPON THE ORDE RS OF THE AUTHORITIES BELOW. 6. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE RE CORDS, ESPECIALLY THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) AND THE DE CISION REFERRED BY THE LD. COUNSEL OF THE ASSESSEE OF THE ITAT, SMC BENCH, MUMBAI DATED 12.8.2016 PASSED IN ITA NOS. 4223 & 4224 (MU M) OF 2015 (AYRS. 2011-12) IN THE CASE OF SMT. MANASI MAHENDRA PITKAR VS. ITO. I FIND CONSIDERABLE COGENCY IN THE ASSESSEES COUNSEL IN R ELYING UPON THE AFORESAID DECISION OF THE ITAT, MUMBAI. FOR THE SAK E OF CLARITY, I AM REPRODUCING THE FINDING GIVEN VIDE PARA NO. 9 & 9 .1 OF THE ITAT, MUMBAI DECISION DATED 12.8.2016 IN THE CASE OF SMT . MANASI MAHENDRA PITKAR VS. ITO, MUMBAI PASSED IN ITA NOS. 4223 & 4 224 (MUM) OF 2015 (AY 2011-12) AS UNDER:- 9. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. IN THE PRESENT CASE THE ADDITION HAS BEEN MADE BY T HE INCOME TAX AUTHORITIES BY TREATING THE CASH DEPOSIT S IN THE BANK ACCOUNT AS AN UNEXPLAINED CASH CREDIT WITH IN THE MEANING OF SECTION 68 OF THE ACT. THE LEGAL POI NT 6 RAISED BY THE ASSESSEE IS TO THE EFFECT THAT THE BA NK PASS BOOK IS NOT AN ACCOUNT BOOK MAINTAINED BY THE ASSESSEE SO AS TO FALL WITHIN THE AMBIT OF SECTION 68 OF THE ACT. UNDER SECTION 68 OF THE ACT, IT IS ONLY WH EN AN AMOUNT IS FOUND CREDITED IN THE ACCOUNT BOOKS OF TH E ASSESSEE FOR ANY PREVIOUS YEAR THAT THE DEEMING PROVISIONS OF SECTION 68 OF THE ACT WOULD APPLY IN THE CIRCUMSTANCES MENTIONED THEREIN. NOTABLY, SECTION 6 8 OF THE ACT WOULD COME INTO PLAY ONLY IN A SITUATIO N 'WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE. THE HON'BLE BOMBAY HIGH.COURT IN THE CASE OF SHRI BHAICHAND GANDHI (SUPRA) HAS APPROVED THE PROPOSITION THAT A BANK PASS BOOK MAINTAINED BY THE BANK CANNOT BE REGARDED AS A BOOK OF THE ASSESSEE F OR THE PURPOSES OF SECTION 68 OF THE ACT. FACTUALLY SPEAKING, IN THE PRESENT CASE, ASSESSEE IS NOT MAINTAINING ANY BOOKS - OF ACCOUNT AND SECTION 68 O F THE ACT HAS BEEN INVOKED BY THE ASSESSING OFFICER O NLY ON THE BASIS OF THE BANK PASS BOOK. THE INVOKING OF SECTION 68 OF THE ACT HAS TO FAIL BECAUSE AS PER TH E JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF SHRI BHAICHAND N GANDHI (SUPRA), THE BANK 7 PASS BOOK OR BANK STATEMENT CANNOT BE CONSTRUED TO BE A BOOK MAINTAINED BY-THE ASSESSEE FOR ANY PREVIO US YEAR AS UNDERSTOOD FOR THE PURPOSES OF SECTION 68 O F THE ACT. THEREFORE, ON THIS ACCOUNT ITSELF, THE IMP UGNED ADDITION DESERVES TO BE DELETED. I HOLD SO. 9.1 EVEN OTHERWISE, I FIND THAT THE EXPLANATION RENDERED BY THE ASSESSEE HAS BEEN MERELY DISBELIEVE D WITHOUT ESTABLISHING ANY CREDIBLE INFIRMITY OR FALL ACY IN THE SAME. OSTENSIBLY, THE CIRCUMSTANCES IN WHICH TH E CASH DEPOSITS HAVE BEEN MADE AND THE PURPOSE FOR WHICH SUCH MONIES HAVE BEEN UTILIZED IS EMERGING FR OM RECORD AND IN ANY CASE, THERE IS NO MATERIAL FOUND BY THE ASSESSING OFFICER TO DISPROVE THE SAME. OF COURSE, THE ASSESSEE COULD NOT PRODUCE ANY FORMAL CORROBORATIVE EVIDENCE OF HAVING RECEIVED RESPECTIV E AMOUNTS FROM FRIENDS AND RELATIVES, SO HOWEVER, IT IS TO BE APPRECIATED THAT SECTION 68 IS A RULE OF EVIDENC E; AND, THE ASSESSING OFFICER IS EXPECTED TO CONSIDER THE EXPLANATION RENDERED IN THE CONTEXT OF THE CIRCUMSTANCES OF EACH CASE. BE THAT AS IT MAY, SINC E I HAVE ALREADY HELD THAT THE ADDITION IS UNSUSTAINABL E FOLLOWING THE RATIO OF THE JUDGMENT IN THE CASE OF SHRI BHAICHAND N GANDHI (SUPRA), I DO NOT DEAL WITH THE 8 INSTANT ASPECT ANY FURTHER. IN THE RESULT, THE ORDE R OF THE CIT (A) IS SET-ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION OF RS. 27,36,500/- MADE UNDER SECTION. 68 OF THE ACT. 9.2 RESULTANTLY, APPEAL OF THE ASSESSEE IN ITA NO. 4224/MUM/2015 IS ALLOWED. 7. AFTER PERUSING THE AFORESAID DECISION OF THE ITA T, MUMBAI, I AM OF THE CONSIDERED VIEW THAT THE ISSUE IN DISPUTE IS S QUARELY COVERED BY THE AFORESAID DECISION, BECAUSE THE FACTS AND CIRCU MSTANCES OF THE PRESENT CASE ARE EXACTLY SIMILAR AND IDENTICAL TO THAT OF CASE OF SMT. MANASI MAHENDRA PITKAR VS. ITO (SUPRA). THEREFORE, RESPECT FULLY FOLLOWING THE AFORESAID DECISION DATED 12.8.2016 OF THE ITAT, MU MBAI SMC BENCH, PASSED IN ITA NO. 4223 & 4224//MUM/2015 (AY 2011- 12) IN THE CASE OF SMT. MANASI MAHENDRA PITKAR VS. ITO, THANE, THE A DDITION OF RS. 10 LACS IN DISPUTE IS DELETED AND ACCORDINGLY, THE GRO UND NO. 5 APPEAL OF THE ASSESSEE IS ALLOWED. 7.1 SINCE I HAVE DELETED THE ADDITION OF RS. 10 LAC S U/S. 68 OF THE ACT, AS AFORESAID, HENCE, THE ADDITION OF RS. 30,000/- U./ S. 69A OF THE ACT ON ACCOUNT OF COMMISSION INCOME @3% DOES NOT SURVIVE, THEREFORE, THE SAME IS ALSO DELETED AND ACCORDINGLY, THE GROUND NO . 6 IS ALLOWED. 9 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17/02/ 2017. SD/- (H.S. SIDHU) JUDICIAL MEMBER DATED: 17/02/2017 *SR BHATNAGAR* COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITATTRUE COPY BY ORDER, ASSISTANT REGISTRAR