ACIT, New Delhi V. M/s. Raj Refullers & Fire Safety Equipment Pvt. Ltd., New Delhi

ITA 6493/DEL/2014

• Counselvise Citation: 649320114 RSA 2014
• Duration Of Justice: 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 08-09-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 28-11-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR B R R KUMAR
• Keywords: Unexplained cash credit; Search and seizure; Opportunity of being heard
• Section: 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC - I NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER I.T.A .NO S . - 6492 TO 6494 /DEL/201 4 (ASSESSMENT YEAR S - 20 04 - 05 TO 2006 - 07) ACIT, CENTRAL CIRCLE - 13, ROOM NO. - 355, 3 RD FLOOR, ARA CENTRE, JHANDEWALAN, NEW DELHI ( APPELLANT) VS RAJ REFULLERS & FIRE EQUIPMENT PVT. LTD., 2A/53, GEETA COLONY, NEW DELHI. PAN - AAACR3712F (RESPONDENT ) APPELLANT BY DR.B.R.R.KUMAR, SR.DR RESPONDENT BY NONE ORDER BY THE PRESENT APPEALS, THE CORRECTNESS OF THE SEPARATE ORDERS DATED 26.09.2014 OF CIT(A) - I, NEW DELHI PERTAINING TO 2004 - 05 TO 2006 - 07 ASSESSMENT YEARS HAVE BEEN ASSAILED ON IDENTICAL GROUNDS. FOR READY - REFERENCE, GROUNDS FROM ITA NO. - 6492/DEL/2014 ARE REPRODUCED HEREUNDER: - 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING ADDITION OF RS.10,00,000/ - MADE BY ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF INCREASE IN SHARE CAPITAL. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING ADDITION OF RS.3,31,000/ - MADE BY ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF INCREASE IN UNSECURED LOANS. 3.(A) THE ORDER OF LD CIT(A) IS ERRONEOUS AND NOT TENABLE IN LAW AND ON FACTS. (B) THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY/ALL OF THE GROUND OF APPEAL BEFORE OR DURING THE COURSE OF THE HEARING OF THE APPEAL. 2. NO ONE WAS PRESENT AT THE TIME OF HEARING ON BEHALF OF THE ASSESSEE. THE N OTICE SENT TO THE ASSESSEE HAS COME BACK UNSERVED WITH THE COMMENT NO SUCH FIRM . THE RECORD SHOWS THAT ON AN EARLIER DATE ALSO, NO ONE WAS PRESENT ON BEHALF OF THE ASSESSEE. HOWEVER, CONSIDERING THE MATERIAL AVAILABLE ON RECORD DATE OF HEARING 08 .0 9 .2015 DATE OF PRONOUNCEMENT 23 .0 9 .2015 I.T.A .NOS. - 6492 TO 6494/DEL/2014 PAGE 2 OF 6 IT WAS CONSIDERED APPRO PRIATE TO PROCEED WITH THE HEARING AFTER HEARING THE LD. SR. DR. 3. THE LD. SR. DR INVITING ATTENTION TO THE FACTS AS RECORDED IN 2004 - 05 ASSESSMENT YEAR SUBMITTED THAT A SEARCH AND SEIZURE OPERATION WAS CARRIED OUT O N MAHESH MEHTA GROUP OF CASES OF 30.06. 2009. RELIANCE WAS PLACED UPON PARAS 1 & 2 OF THE ASSESSMENT ORDER WHICH ADDRESS THE BACKGROUND OF THE CASE, FOR READY - REFERENCE, THE SAME ARE REPRODUCED HEREUNDER: - A SEARCH AND SEIZURE OPERATION WAS CARRIED OUT IN MAHESH MEHTA GROUP OF CASES ON 30 - 06 - 2009. DURING THE COURSE OF SEARCH AT THE RESIDENTIAL PREMISES OF THE ASSESSEE AT BA - 17A, DDA FLATS, PHASE - L, ASHOK VIHAR, DELHI - 110052 CERTAIN DOCUMENTS BELONGING TO THE ASSESSEE I.E. PERSON OTHER THAN COVERED UNDER SEARCH U/S 132 OF THE I.T. ACT WERE FOUN D AND SEIZED. THE CASE OF THE ASSESSEE WAS CENTRALIZED IN THIS CIRCLE VIDE ORDER IN F.NO.CIT - V/CENTRALIZATION/09 - 10/466 DATED 25 - 02 - 2010 BY COMMISSIONER OF INCOME TAX, DELHI - V, NEW DELHI U/S 127 OF THE ACT. ON THE BASIS OF DOCUMENTS SO SEIZED AFTER RECORD ING SATISFACTION ASSESSMENT PROCEEDINGS WERE INITIATED U/S 153C OF THE I.T. ACT. SUBSEQUENTLY NOTICE U/S 153C WAS ISSUED ON 04 - 11 - 2011 FOR FURNISHING OF RETURNS OF INCOME. 2. IN RESPONSE TO THE SAME THE ASSESSEE HAS FILED LETTER STATING THEREIN THAT RETUR N OF INCOME FILED ORIGINALLY AS PER PROVISION OF SECTION 139 OF THE I.T. ACT MAY BE TREATED TO HAVE BEEN FILED U/S 153 C OF THE I.T. ACT. 3. 1. RELYING UPON PARAS 4 & 5 OF THE ASSESSMENT ORDER IT WAS HIS SUBMISSION THAT ON ACCOUNT OF THE ASSESSEE S FAILU RE TO EXPLAIN THE INCREASE OF SHARE APPLI CATION MONEY OF RS.10 LACS AND FAILURE TO EXPLAIN THE UNSECURED LOANS OF RS.3.31 LACS ADDITION OF RS.13,31,000/ - WAS MADE BY THE AO . FOR READY - REFERENCE, PARA S 4 & 5 OF THE ASSESSMENT ORDER ARE REPRODUCED HEREUNDER: - 4. FROM THE PERUSAL OF BALANCE SHEET FILED IT WAS NOTICED THAT THERE WAS INCREASE OF RS. 10 LAC IN THE SHARE APPLICATION MONEY & RS. 3.31 LACS IN UNSECURED LOANS. THERE WAS ALSO ADDITION OF RS.12,18,9 80/ - IN THE FIXED ASSETS. THE ASSESSEE WAS REQUIRED TO FURNISH THE DETAILS OF THE ABOVE VIDE THIS OFFICE LETTER DATED 05 - 12 - 2011. ON 16/12/2011 AR OF THE ASSESSEE ATTENDED THE PROCEEDINGS & FILED LETTER DATED 12/12/2011 ALONGWITH COPY OF BALANCE SHEET & PROFIT & LOSS A/C. THE ASSESSEE STATED THAT NO INCOME TAX RETURN WAS FILED AS THERE WAS NO BUSINESS ACTIVITY. THE ASSESSEE WAS REQUIRED TO FILED DETAILS OF SHARE APPLICATION MONEY INTRODUCED DURING THE YEAR WITH, IDENTITY / GENUINENESS/ CREDITWORTHINESS OF PERSONS & ALSO DETAILS OF UN SECURED LOANS & THE CASE WAS ADJOURNED 21/12/2011. ON THIS DATE THE CASE WAS ADJOURNED TO 23/12/2011. ON 23/12/2011 THE ASSESSEE FILED COPY OF INCOME TAX RETURN & FURTHER STATED THAT THEY ARE UNABLE TO PROVIDE THE DETAILS AS REQUIRED VIDE ORDER SHEET ENTRY DATED 16/12/2011. I.T.A .NOS. - 6492 TO 6494/DEL/2014 PAGE 3 OF 6 5. THE ASSESSEE HAS FAILED TO PROVIDE THE DETAILS FROM WHOM SHARE APPLICATION MONEY & UNSECURED LOANS HAVE BEEN TAKEN & HAS NOT BEEN ABLE TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION, THE SAME IS TREATED AS UNEXPLAINED CASH CREDIT IN THE HANDS OF THE ASSESSEE & ADDED TO THE INCOME OF ASSESSEE. PENALTY PROCEEDINGS U/S 271(1)(C) OF THE IT. ACT, 1961 ARE BEING INITIATED SEPARATELY. 4. INVITING ATTENTION TO THE IMPUGNED OR DER IT WAS SUBMITTED THAT T HE JURISDICTIONAL ISSUE RAISED BY THE ASSESSEE ON FACTS WAS REJECTED BY THE CIT(A) H OLDING AS UNDER: - 6.4 HOWEVER, I FIND THAT THE APPELLANT DID NOT ASK FOR COPY OF THE SATISFACTION DURING THE ASSESSMENT PROCEEDINGS, COMPLIED WI TH THE NOTICES AND DID NOT OBJECT TO THE PROCEEDINGS AT THAT STAGE. HAVING COMPLIED WITH THE NOTICES AND JOINED THE PROCEEDINGS, IT IS NOT APPROPRIATE FOR THE APPELLANT TO RAISE ISSUES RELATING TO JURISDICTION AT THE APPELLATE STAGE. I ALSO FIND THAT AN OR DER U/S 127 WAS DULY PASSED IN THE CASE AND NOT OBJECTED TO BY THE APPELLANT. IN THE CIRCUMSTANCES, IT CANNOT BE CONCLUDED THAT THE ASSESSMENT PROCEEDINGS SUFFER FROM LACK OF JURISDICTION. 1 HOLD ACCORDINGLY AND PROCEED TO DECIDE THE CASE ON MERITS. 5 . I N THE SAID BACKGROUND, DELETION OF THE ADDITION ON THE FOLLOWING REASONING WAS ASSAILED BY HIM. FOR READY - REFERENCE THE SAME IS EXTRACTED FROM THE IMPUGNED ORDER : - 7.1. THE REVENUE HAS COMPLETED ASSESSMENTS IN THE CASE OF THE APPELLANT FOR THE AY FROM 20 04 - 05 TO 2007 - 08 TREATING THE SHARE APPLICATION MONEY / INCREASE THEREOF AND THE INCREASE IN LOAN / PART THEREOF, AS UNEXPLAINED CREDIT IN THE BOOKS OF THE APPELLANT IN THE ABSENCE OF DETAILS / EVIDENCES, HOLDING THAT THE APPELLANT HAD FAILED TO DISCHARGE ITS ONUS OF ESTABLISHING THE TRANSACTIONS. A TABLE INDICATING THE YEAR - WISE ADDITIONS MADE ON ACCOUNT OF SHARE APPLICATION MONEY AND UNSECURED LOAN IS GIVEN BELOW: FY SHARE APPLICATION (SA) INCREASE/ DECREASE IN SA UNSECURED LOAN (USL) INCREASE / DECREASE IN USL ADDITION OF SA ADDITION OF USL 2002 - 03 2100000 12694765 2003 - 04 3300000 1200000 13974755 1279990 1000000 331000 2004 - 05 3300000 0 14602256 627501 0 627501 2005 - 06 3300000 0 15419312 817056 0 817056 2006 - 07 0 - 3300000 20682006 5262694 0 5262694 7.2 IT WOULD BE SEEN FROM THE ABOVE TABLE THAT ADDITIONS MADE ARE NOT CONSISTENT IN AS MUCH AS THAT IN FY 2003 - 04 (AY 2004 - 05) WHILE THE INCREASE IN SHARE APPLICATION AMOUNTED TO RS. 12,00,000 / - THE I.T.A .NOS. - 6492 TO 6494/DEL/2014 PAGE 4 OF 6 ADDITION MADE WAS RS.10,00,000 / - AND WHILE THE INCREASE IN UNSECURED LOAN AMOUNTED TO RS. 12,79,990 / - ADDITION MADE WAS RS.3,31,000/ - . THE ENTIRE SHARE APPLICATION MONEY WAS REPAID IN FY 2006 - 07, OUT OF WHICH THE AMOUNT OF RS. 12,00,000 / - WAS REPAID TO THE RESPECTIVE PARTIES ON 26.11.2007, IN SUBSEQUENT YEARS (FY 2004 - 05 TO 2006 - 07), HOWEVER, THE ENTIRE AMOUNT OF INCREASE IN UNSECURED LOANS CONSISTING OF NET OF EXISTING LOANS INCREASED BY FRESH LOANS RAISED AND DECREASED BY LOANS REPAID AND THE INTEREST ACC RUED THEREON WAS ADDED AS INCOME. THUS, THE ADDITIONS MADE BY THE AO IN ASSESSMENTS FRAMED ON THE SAME DAY IN THE CASE OF THE SAME APPELLANT SUFFER FROM FACTUAL INACCURACIES AS WELL AS INTERNAL INCONSISTENCIES. 7.3. IN THE PRESENT ASSESSMENT YEAR, ADDITION OF RS. 10,00,000 / - WAS MADE ON ACCOUNT OF INCREASE IN SHARE APPLICATION MONEY AND ADDITION OF RS.3,31,000 / - WAS MADE ON ACCOUNT OF INCREASE IN UNSECURED LOANS. IT IS CLEAR FROM THE DOCUMENTS FILED THAT SHARE APPLICATION WAS RECEIVED FROM TWO COMPANIES WHO ARE EXISTING ASSESSEES ON THE RECORD OF THE DEPARTMENT. UNSECURED LOANS HAD BEEN RAISED FROM THE TWO DIRECTORS OF THE APPELLANT COMPANY. DURING THE YEAR ANOTHER LOAN OF RS.3,65,000/ - WAS RAISED FROM ONE OF THE DIRECTORS. BOTH THESE PERSONS ARE EXITING ASS ESSEES ON THE RECORD OF THE DEPARTMENT. THESE TRANSACTIONS TOOK PLACE THROUGH BANKING CHANNELS. NO EVIDENCE WAS FOUND IN THE SEARCH OR HAS BEEN BROUGHT ON RECORD TO ESTABLISH THAT THE SHARE APPLICATION MONEY / LOAN WAS NOT GENUINE OR INTRODUCED AS / RECEIV ED IN LIEU OF CASH. THE ADDITIONS MADE WITHOUT ANY INCRIMINATING MATERIAL OR BASIS CANNOT BE SUSTAINED AND ARE DELETED. 6 . ACCORDINGLY INVITING ATTENTION TO PARA 7.2 OF THE SAME IT WAS HIS SUBMISSION THAT THE REASONING ADOPTED BY THE LD. CIT(A) THAT THE INCREASE IN THE SHARE CAPITAL WAS RS.12 LACS AND ADDITION OF ONLY RS.10 LACS WA S MADE IT WAS SUBMITTED IS A VERY STRANGE REASONING WHICH CANNOT BE SUPPORTED. IF THE INCREASE IN SHARE CAPITAL IS RS. 12 LACS AND OUT OF THAT RS.2 LACS IS EXPLAINED BY THE ASSESSEE AS BEING SOURCED FROM GENUINE SOURCES. IN THESE CIRCUMSTANCES IT WAS SUBMITTED HOW CAN THE AO BE FAULTED FOR MAKING ADDITION ONLY TO THE EXTRACT OF THE AMOUNT WHICH IS TREATED AS BEING FROM NON - GENUINE SOURCES. L IMITING THE ADDITION TO THE NON - G ENUINE SOURCES IS FULLY JUSTIFIED AND THIS REASONING COULD NOT HAVE BEEN ADOPTED FOR DELETING THE ADDITION ENTIRELY . S IMILAR LY IT WAS SUBMITTED IS THE POSITION OF RS.3.31 LACS. INVITING FURTHER ATTENTION TO PARA 7.2 AGAIN IT WAS HIS SUBMISSION THAT THE CONCLUSION THAT IT HAS BEEN REPAID IN 2007 - 08 ASSESSMENT YEAR HAS NOT BEEN ARRIVED AT BY THE CIT(A) BY MAKING A REFERENCE TO ANY EVIDENCE CONSIDERED. W HETHER IT I S BASED ON A FINDING ARRIVED AT BY THE AO IN THAT YEAR OR I T I S A FINDING ARRIVED AT IN S O M E APPELLATE FORUM THE FACT REMAINS IT WAS ARGUED THAT TH E ISSUE IS NOT ADDRESS ED. I N THE ABSENCE OF DISCUSSION ON RELEVANT FACTS AND ON THE INABILITY OF THE I.T.A .NOS. - 6492 TO 6494/DEL/2014 PAGE 5 OF 6 ASSESSEE WHOSE FIRM IS FOUND TO BE CLOSED TO EXPLAIN THE SAME . IT WAS HIS SUBMISSION THAT THE IMPUGNED ORDER MAY BE SET ASIDE TO THE LD. CIT(A) TO CONSIDER THE FACTS AFRESH BASED ON COGENT EVIDENCE AND IF NEED BE OBTAIN A REMAND REPORT FROM THE AO IN ORDER TO CONCLUSIVELY DECIDE THE ISSUE ON CORRECT FACTS AND LAW. 6 .1. IT WAS HIS SUBMISSION, INVITING ATTENTION TO THE FACTS IN 2005 - 06 & 2006 - 07 ASSESSMENT YEARS THAT IDENTICAL REASONING HAS BEEN TAKEN BY THE CIT(A) IN BOTH THE YEARS FOR DELETING THE ADDITION MADE AND THE ARGUMENTS ACCORDINGLY REMAINED IDENTICAL AND FO R SIMILAR REASONS SET SIDE ON FACTS IS PRAYED FOR IN THOSE YEARS ALSO. 7 . HAVING HEARD THE SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD, I AM OF THE VIEW THAT IN THE FACTS BROUGHT OUT HEREIN ABOVE IN DETAIL THE ARGUMENTS OF THE LD. SR. DR H AVE TO BE ACCEPTED. THE ADDITION IN THE FACTS OF THE PRESENT CASE AS FAR AS INCREASE IN SHARE CAPITAL IS CONCERNED W AS OBVIOUS LY LIMITED T O THAT PORTION OF THE SOURCE OF INCREASE IN SHARE CAPITAL WHICH WA S FOUND TO BE NOT GENUINE . THE FACT THAT THE INCRE ASE IN SHARE CAPITAL WAS OVER AND ABOVE THE ADDITION IS THUS NOT RELEVANT AS ITS GENUINENESS IS NOT QUESTIONED BY THE AO. THUS THAT PORTION OF THE INCREASE IN SHARE CAPITAL HAS NECESSARILY TO BE EXCLUDED. SIMILARLY IF UNSECURED LOANS HAVE NOT BEEN EXPLAI NED, THE ADDITION ON FACTS IS WARRANTED. IT IS FURTHER SEEN THAT THE CONCLUSION THAT IN 2007 - 08 ASSESSMENT YEAR, AMOUNTS WAS REPAID DOES NOT ELABORATE WHAT IS THE EVIDENCE CONSIDERED FOR ARRIVING AT THE SAID CONCLUSION SINCE THE IMPUGNED ORDER IS SILENT A S THE EVIDENCE TAKEN INTO CONSIDERATION THE SAME CANNOT BE SUSTAINED. THE ATTEMPTS OF THE ITAT TO SERVE NOTICE UPON THE ASSESSEE HAVING FAILED HAS RESULTED THAT THE ASSESSEE IS ALSO NOT IN A POSITION TO THROW LIGHT ON THESE CRUCIAL ASPECTS. ACCORDINGLY I N VIEW OF THE ABOVE REASONS, THE IMPUGNED ORDER IS SET ASIDE AND THE ISSUE S ARE RESTORED BACK TO T H E FILE TO THE CIT(A) WITH THE DIRECTION TO PASS A SPEAKING ORDER IN ACCORDAN CE WITH AND IF NEED TO OBTAIN A REMAND REPORT FROM THE AO AFTER GIVING THE ASSES SEE A REASONABLE OPPORTUNITY OF BEING HEARD . 8. SINCE THE FACTS , THE CIRCUMSTANCES AND THE GROUNDS ARE IDENTICAL IN ALL THE YEARS EXCEPT FOR THE DIFFERENCES IN AMOUNTS THEREFORE, FOR SIMILAR REASONS THESE APPEALS ARE ALSO RESTORED BACK AFTER SETTING ASID E THE FINDING ARRIVED AT IN THE I.T.A .NOS. - 6492 TO 6494/DEL/2014 PAGE 6 OF 6 RESPECTIVE IMPUGNED ORDERS AGAIN BACK TO THE FILE TO THE CIT(A) WITH THE DIRECTION TO DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. THE SAID ORDER WAS ANNOUNCED ON THE DATE OF HEARING ITSELF. 9 . IN THE RESULT, THE APPEALS OF THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 2 3 R D OF SEPTEMBER, 2015. S D / - (DIVA SINGH) JUDICIAL MEMBER DATED: 2 3 /09 /2015 * AMIT KUMAR * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI