Craftpac Containers Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 547/DEL/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5001 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 27-07-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 31-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Assessment record
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI B BEN CH, NEW DELHI BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER AND SHRI K.N. CHARY, JUDICIAL MEMBER. ITA NO. 547/DEL/2017 [ASSESSMENT YEAR: 2011-12] CRAFTPAC CONTAINERS PRIVATE LIMITED VS. THE I.T. O M 259, GREATER KAILASH - II, WARD 3(4) NEW DELHI NEW DELHI PAN : AAACC 0305 M [APPELLANT] [RESPONDENT] DATE OF HEARING : 02.08.2017 DATE OF PRONOUNCEMENT : 28.08.2017 ASSESSEE BY : SHRI VED JAIN, SHRI RANO JAIN, ADV. SHRI ASHISH GOEL, CA REVENUE BY : SHRI ANSHU PRAKASH , CIT-DR ORDER PER B.P. JAIN, ACCOUNTANT MEMBER, THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER OF THE LD. CIT(A)-2, NEW DELHI VIDE ORDER DATED 12.10.2016 FOR ASSESSMENT YEAR 2011-12. 2 ITA NO. 547/DEL/2017 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL; 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) [CIT(A)] IS BAD BOTH IN THE EYE OF LAW AND ON FACTS . 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN ENHANC ING THE INCOME OF THE ASSESSEE BY RS.4.00 CRORES WITHOUT FO LLOWING DUE PROCEDURE AS PRESCRIBED UNDER THE LAW. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN MAKIN G ADDITION OF AN AMOUNT OF RS.4.00 CRORES IN THE HANDS OF THE AP PELLANT COMPANY. 4(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN TREAT ING THE AMOUNT OF RS.4.00 CRORES RECEIVED BY MR. HARISH KANWAR AND MRS. ANJALI KANWAR AS ADVANCE AGAINST SALE OF PROPERTY FROM M/S OEC DIASCANS LTD. AS REPRESENTING THE UNDISCLOSED INCOM E OF THE APPELLANT COMPANY. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN IGNORI NG THE EXPLANATION AND EVIDENCES SUBMITTED BY THE APPELLAN T COMPANY IN SUPPORT OF ITS CONTENTION. 3 ITA NO. 547/DEL/2017 III) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN MAKING THE ABOVESAID ADDITION OF RS.4.00 CRORES AS UNEXPLAINED INCOME OF THE APPELLANT COMPANY DESPITE THE FACT THAT THE APP ELLANT COMPANY HAD DISCHARGED ITS ONUS OF HAVING RECEIVED THE AMOUNT FROM ITS TWO DIRECTORS, VIZ., MR. HARISH KANWAR AND MRS. ANJALI KANWAR. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN DRAWIN G ADVERSE INFERENCE AGAINST THE APPELLANT COMPANY BY COLLECTI NG MATERIAL AT THE BACK OF THE APPELLANT COMPANY AND WITHOUT GI VING AN OPPORTUNITY OF REBUTTAL/ CROSS EXAMINATION. 6. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTE R ANY OF THE GROUNDS OF APPEAL. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY FILED A RETURN OF INCOME DECLARING A TOTAL INCOME OF RS. 32 ,35,365/-. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND A NOTICE UNDER SECTION 143(2) OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT' FOR SHOR T] WAS ISSUED TO THE ASSESSEE COMPANY. THE ASSESSMENT WAS COMPLETED BY M AKING A PROTECTIVE ADDITION OF RS. 1,00,35,866/- IN THE HAN DS OF THE APPELLANT COMPANY UNDER SECTION 2(22)(E) OF THE ACT. 4 ITA NO. 547/DEL/2017 4. AGGRIEVED BY THE ASSESSMENT ORDER DATED 28.02.20 14, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). THE CI T(A) DELETED THE PROTECTIVE ADDITION OF RS. 1,00,35,866/- UNDER SECT ION 2(22)(E) OF THE ACT. HOWEVER, THE INCOME OF THE APPELLANT COMPANY W AS ENHANCED BY RS. 4 CRORES BY THE CIT(A). 5. THE ASSESSMENT RECORD WOULD REVEAL THAT DURING T HE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY MADE TWO FIXED DEPOSITS OF RS. 4 CRORES EACH IN CITIBANK, GURGAON. THE ADDITION OF R S. 1,00,35,866/- PERTAINS TO THE FIRST FDR MADE BY THE ASSESSEE COMP ANY AND THE ENHANCEMENT MADE BY THE CIT(A) OF RS. 4 CRORES RELA TES TO THE SECOND FDR. IN THE PRESENT APPEAL, WE ARE CONCERNED WITH T HE FACTS RELATING TO THE SECOND FDR OF RS. 4 CRORES. 6. THE LD. AR SUBMITS THAT THE SECOND FDR WAS MADE IN CASH RECEIVED BY THE DIRECTORS OF THE APPELLANT COMPANY, SH. HARISH KANWAR AND SMT. ANJALI KANWAR. THE DIRECTORS RECEIVED THE SAID AMOUNT FROM M/S OEC DIASCANS LTD. AS ADVANCE AGAINST SALE OF TH EIR PROPERTY BEING PLOT NO. 14 OF CHAMPA MARG MEASURING 420 SQ. METRES SITUATED AT DLF QUTAB ENCLAVE COMPLEX, VILLAGE GHOSI, DLF COMPLEX, PHASE-1, SIKKANDARPUR, DISTRICT GURGAON. THE SAID DIRECTORS WERE OWNERS OF THE 5 ITA NO. 547/DEL/2017 AFORESAID PROPERTY. THE LD. AR THEN REFERS TO THE A GREEMENT TO SELL DATED 10.09.2010 ENTERED INTO BETWEEN THE DIRECTORS AND M/S OEC DIASCANS LTD. REGARDING THE SALE OF THE AFORESAID P ROPERTY AND ALSO THE RECEIPT ATTACHED THEREOF. IT WAS FURTHER SUBMITTED THAT THE NAME OF M/S OEC DIASCANS WAS CHANGED TO M/S SILVER SAND COR PORATION LTD. AND THE ADDRESS, PAN, BALANCE SHEET WAS SUBMITTED BY TH E APPELLANT TO THE CIT(A). THE LD. AR ARGUED THAT THE SAID AMOUNT WAS RETURNED BACK BY THE BANK AS THE DEAL WAS NOT MATERIALIZED AND THE A MOUNT WAS REFUNDED TO M/S OEC DIASCANS LTD. BY THE DIRECTORS OF THE COMPANY. HE THUS SUBMITTED THAT THE APPELLANT COMPANY HAS PROVE D THE GENUINENESS, CREDITWORTHINESS AND IDENTITY W.R.T. T HE TRANSACTION OF RS. 4 CRORES. 7. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE O RDER PASSED BY THE CIT(A). IT WAS SUBMITTED THAT NO ADVANCE WAS AC TUALLY GIVEN BY M/S OEC DIASCANS LTD. TO THE DIRECTORS OF THE APPELLANT COMPANY. IT WAS FURTHER SUBMITTED THAT THE AGREEMENT TO SELL WAS NO T A GENUINE DOCUMENT AND THE AMOUNT OF RS. 4 CRORES OUT WHICH T HE SECOND FDR WITH CITI BANK WAS MADE REPRESENTS THE UNDISCLOSED INCOME OF THE APPELLANT COMPANY. 6 ITA NO. 547/DEL/2017 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD AND JUDGMENTS RELIED UPON. THE SECOND FDR OF RS. 4 CROR ES WAS MADE IN CASH BY THE ASSESSEE COMPANY IN CITI BANK, GURGAON. THE LD. AR HAS REFERRED TO THE LEDGER ACCOUNT IN THE BOOKS OF M/S OEC DIASCANS LTD. AND THE LEDGER ACCOUNT IN THE BOOKS OF MR. HARISH K ANWAR AND MS. ANJALI KANWAR OF M/S OEC DIASCANS LTD. THE LEDGER A CCOUNTS SUPPORT THE SUBMISSIONS MADE BY THE LD. AR THAT THE AMOUNT OF RS. 4 CRORES WERE RECEIVED BY THE DIRECTORS MS. ANJALI KANWAR AN D MR. HARISH KANWAR FROM M/S OEC DIASCANS LTD. THEREAFTER, THE RECEIPT OF CASH BY THE ASSESSEE COMPANY FROM MS. ANJALI KANWAR AND MR. HARISH KANWAR IS ALSO EVIDENT FROM THE COPY OF LEDGER ACCOUNT OF BOT H THE DIRECTORS IN THE BOOKS OF THE ASSESSEE COMPANY. THE DEPARTMENT H AS NOT BROUGHT ANYTHING ON RECORD TO DISPUTE THE AFORESAID SEQUENC E OF TRANSACTIONS. MOREOVER, THE RETURN OF AMOUNT TO THE DIRECTORS AND BY THE DIRECTORS TO M/S OEC DIASCANS LTD. IS ALSO EVIDENCED BY THE B ANK STATEMENTS AND THE CERTIFICATE GIVEN BY THE BANK TO THE DIRECTORS. THIS CLEARLY SHOWS THAT THE TRANSACTION WAS GENUINE WITHIN THE MEANING OF SECTION 68 OF THE ACT. 9. IT IS SEEN THAT THE DEPARTMENT HAD TRIED SER VING NOTICE TO M/S OEC DIASCANS LTD. WHICH REMAINED UN-SERVED. HOWEVER , THE DEPARTMENT DESPITE HAVING THE ADDRESS OF THE CHANGE D COMPANY M/S 7 ITA NO. 547/DEL/2017 SILVER SAND CORPORATION DID NOT MAKE ANY ENQUIRY WI TH RESPECT TO THE AFORESAID TRANSACTIONS. THE NET WORTH OF THE COMPAN Y M/S SILVER SAND CORPORATION LTD. FROM ITS BALANCE-SHEET REVEALS THA T IT IS REGULARLY FILING ITS RETURN OF INCOME AND TOTAL SOURCES OF FU NDS ARE RS. 85.46 CRORES. THE DIN AND THE ADDRESS OF THE SAID COMPANY ARE ALSO ON RECORD. THE ASSESSEE HAD THEREFORE, PROVED THE GENU INENESS, CREDITWORTHINESS AND IDENTITY AS REQUIRED UNDER SEC TION 68 OF THE ACT. THE ADDITION CANNOT BE MADE IN THE HANDS OF THE ASS ESSEE FOR NOT PROVING THE SOURCE OF SOURCE OF INVESTMENT AND THE ASSESSEE IS NOT REQUIRED TO PROVE THAT THE SUB CREDITOR HAD THE CRE DITWORTHINESS OF MAKING THE INVESTMENT. 10. IN THE CASE OF NEMI CHAND KOTHARI VS. CIT 264 I TR 254, THE HON'BLE HIGH COURT HELD AS UNDER:- KEEPING IN VIEW THE ABOVE POSITION OF LAW, WHEN WE TURN TO THE FACTUAL MATRIX OF THE PRESENT CASE, WE FIND THAT SO FAR AS THE APPELLANT IS CONCERNED, HE HAS ESTABLISHED THE IDEN TITY OF THE CREDITORS, NAMELY, NEMICHAND NAHATA AND SONS (HUF) AND PAWAN KUMAR AGARWALLA. THE APPELLANT HAD ALSO SHOWN, IN A CCORDANCE WITH THE BURDEN, WHICH RESTED ON HIM UNDER SECTION 106 OF THE EVIDENCE ACT, THAT THE SAID AMOUNTS HAD BEEN RECEIV ED BY HIM BY WAY OF CHEQUES FROM THE CREDITORS AFOREMENTIONED. I N FACT, THE 8 ITA NO. 547/DEL/2017 FACT THAT THE ASSESSEE HAD RECEIVED THE SAID AMOUNT S BY WAY OF CHEQUES WAS NOT IN DISPUTE. ONCE THE ASSESSEE HAD E STABLISHED THAT HE HAD RECEIVED THE SAID AMOUNTS FROM THE CREDITORS AFOREMENTIONED BY WAY OF CHEQUES, THE ASSESSEE MUST BE TAKEN TO HAVE PROVED THAT THE CREDITOR HAD THE CREDITWORTHIN ESS TO ADVANCE THE LOANS. THEREAFTER THE BURDEN HAD SHIFTED TO THE ASSESSING OFFICER TO PROVE THE CONTRARY. ON MERE FAILURE ON THE PART OF THE CR EDITORS TO SHOW THAT THEIR SUB-CREDITORS HAD CREDITWORTHINESS TO AD VANCE THE SAID LOAN AMOUNTS TO THE ASSESSEE, SUCH FAILURE, AS A CO ROLLARY, COULD NOT HAVE BEEN AND OUGHT NOT TO HAVE BEEN, UNDER THE LAW , TREATED AS THE INCOME FROM THE UNDISCLOSED SOURCES OF THE ASSE SSEE HIMSELF, WHEN THERE WAS NEITHER DIRECT NOR CIRCUMSTANTIAL EV IDENCE ON RECORD THAT THE SAID LOAN AMOUNTS ACTUALLY BELONGED TO, OR WERE OWNED BY, THE ASSESSEE. VIEWED FROM THIS ANGLE, WE HAVE NO HESITATION IN HOLDING THAT IN THE CASE AT HAND, THE ASSESSING OFFICER HAD FAILED TO SHOW THAT THE AMOUNTS, WHICH HAD COME TO THE HANDS OF THE CREDITORS FROM THE HANDS OF THE SUB-CREDITOR S, HAD ACTUALLY BEEN RECEIVED BY THE SUB-CREDITORS FROM THE ASSESSE E. IN THE ABSENCE OF ANY SUCH EVIDENCE ON RECORD, THE ASSESSI NG OFFICER COULD NOT HAVE TREATED THE SAID AMOUNTS AS INCOME DERIVED BY THE APPELLANT FROM UNDISCLOSED SOURCES. THE LEARNED TRI BUNAL SERIOUSLY FELL INTO ERROR IN TREATING THE SAID AMOUNTS AS INC OME DERIVED BY THE APPELLANT FROM UNDISCLOSED SOURCES MERELY ON TH E FAILURE OF THE SUB-CREDITORS TO PROVE THEIR CREDITWORTHINESS. 9 ITA NO. 547/DEL/2017 11. IN THE CASE OF SAROGI CREDIT CORPORATION VS. C IT 103 ITR 344 (PATNA), THE HON'BLE HIGH COURT OBSERVED AS UNDER: - ONCE THE IDENTITY OF THE THIRD PARTY IS ESTABLISHED BEFORE THE INCOME TAX OFFICER AND SUCH OTHER EVIDENCE ARE PRIM A FACIE PLACED BEFORE HIM POINTING TO THE FACT THAT THE ENT RY IS NOT FICTITIOUS, THE INITIAL BURDEN LYING ON THE ASSESSE E CAN BE SAID TO HAVE BEEN DULY DISCHARGED BY HIM. IT WILL NOT, THER EFORE, BE FOR THE ASSESSEE TO EXPLAIN FURTHER AS TO HOW OR IN WHA T CIRCUMSTANCES THE THIRD PARTY OBTAINED THE MONEY OR HOW OR WHY HE CAME TO MAKE ADVANCE OF THE MONEY AS A LOAN TO T HE ASSESSEE. ONCE SUCH IDENTITY IS ESTABLISHED AND THE CREDITORS, AS IN THE PRESENT CASE, HAVE PLEDGED THEIR OATH THAT T HEY HAVE ADVANCED THE AMOUNTS IN QUESTION TO THE ASSESSEE, T HE BURDEN IMMEDIATELY SHIFTS ON THE DEPARTMENT TO SHOW AS TO WHY THE ASSESSEES CASE COULD NOT BE ACCEPTED AND AS TO WHY IT MUST BE HELD THAT THE ENTRY, THOUGH PURPORTING TO BE IN THE NAME OF THE THIRD PARTY, STILL REPRESENTED THE INCOME OF THE AS SESSEE FROM A SUPPRESSED SOURCE. AND, IN ORDER TO ARRIVE AT SUCH A CONCLUSION, EVEN THE DEPARTMENT HAS TO BE IN POSSESSION OF SUFF ICIENT AND ADEQUATE MATERIALS. THE INCOME TAX OFFICERS REJECTION, NOT OF THE EXPL ANATION OF THE ASSESSEE, BUT OF THE EXPLANATION REGARDING THE SOURCE OF INCOME OF THE DEPOSITORS, COULD NOT BY ITSELF LEAD TO ANY INFERENCE REGARDING THE NON-GENUINE OR FICTITIOUS C HARACTER OF THE ENTRIES IN THE ASSESSEES BOOK OF ACCOUNT. 10 ITA NO. 547/DEL/2017 12. IN VIEW OF THE ABOVE JUDICIAL PRONOUNCEMENTS, T HE GROUNDS RAISED BY THE APPELLANT COMPANY ARE ALLOWED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN I TA NO. 547/DEL/2017 IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 28.08. 2017. SD/- SD/- [K.N. CHARY] [B.P. JAIN] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 28 TH AUGUST, 2017 VL/ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI