Skyline Motors India Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 743/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97967 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 18-11-2015
• Assessment Year: 2001-2002
• Appeal Filed On: 06-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUJIT KUMAR SENIOR
• Assessee Lawyers: K P GARG
• Keywords: Source of fund
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G : NEW DELHI) BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI A.T. VARKEY, JUDICIAL MEMBER ITA NO.1220/DEL./2010 ITA NO.743/DEL/2013 (ASSESSMENT YEAR : 2001-02) M/S. SKYLINE MOTORS (I) PVT. LTD., VS. AO, WARD 8(4), 63, MANAVSATHALI, NEW DELHI. CGHS, VASUNDHRA ENCLAVE, NEW DELHI 110 096. (PAN : AAGCS1956C) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K. P. GARG, C.A. REVENUE BY : SHRI SUJIT KUMAR, SENIOR DR DATE OF HEARING : 18.11.2015 DATE OF PRONOUNCEMENT : 27.11.2015 ORDER PER A.T.VARKEY JUDICIAL MEMBER : THESE TWO APPEALS ARISE FROM THE ORDER DATED 02 ND FEBRUARY, 2010 & 19 TH NOVEMBER, 2012 OF CIT (APPEALS)-XI, NEW DELHI AND RELATES TO ASSESSMENT YEAR 2001-02. 2. ITA NO.1220/DEL/2010 IS THE QUANTUM APPEAL AND I TA NO.743/DEL/2013 IS THE APPEAL RELATING TO LEVY OF P ENALTY U/S 271(1) (C) OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT). ITA NO.1220/DEL./2010 ITA NO.743/DEL./2013 2 3. THE GROUNDS RAISED BY THE ASSESSEE IN THE QUANTU M APPEAL ARE EFFECTIVELY AGAINST AN ADDITION OF RS.3,05,000/- RE PRESENTING SHARE CAPITAL, BROUGHT TO TAX U/S 68 OF THE ACT. 4. FOR THE INSTANT YEAR, THE ASSESSEE FILED RETURN OF INCOME ON 31.10. 2001, AT AN INCOME OF RS.2,60,850/-. THE AO IN AN ORDER D ATED 11.03.2004 INTER ALIA MADE AN ADDITION OF RS.3,35,000/- U/S 68 OF THE ACT . THIS ADDITION WAS CONFIRMED IN APPEAL BY THE CIT(A) VIDE ORDER DATED 08.11.2004. ON FURTHER APPEAL, THE TRIBUNAL, SO FOR AS SUM OF RS 3,05,000/ - IS CONCERNED, HELD BY ORDER DATED 31.07.2007 AS UNDER :- 24. WE HAVE HEARD THE PARTIES AND PERUSED THE RECO RD OF THE CASE. THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENG AGED IN THE BUSINESS OF PLYING BUSES ON HIRE. DURING THE YEAR U NDER CONSIDERATION THE ASSESSEE HAD RECEIVED SHARE APPLI CATION MONEY IN CASH FROM THE FOLLOWING PERSONS. (1) MOHAMMAD ASLAM (RS. 1,20,000/-) (2) SHRI RAJINDER SINGH (RS. 30,000/-) (3) SHRI VIJAY CHAUHAN (RS. 80,000/-) (4) DINESH DUBEY (RS. 50,000/-) (5) ASHOK DUBEY (RS. 25,000/-) 25. THE ASSESSEE PRODUCE ONE MOHAMMAD ASLAM, HOWEVE R, SHRI ASLAM FAILED TO ESTABLISH HIS IDENTITY NOR HE COULD SATISFACTORILY EXPLAINED THE SOURCE OF MONEY OF RS. 1,20,000/- DEPOSITED AS SHARE APPLICATION MONEY WITH THE ASSES SEE. WITH REGARD TO OTHER SHARE APPLICANTS, THE ASSESSING OFF ICER HAS PROCEEDED TO MAKE THE ADDITION ON THE ASSUMPTION TH AT THE HIRE CHARGES PAID BY THE ASSESSEE TO THESE PERSONS HAS B EEN RETURNED TO THE ASSESSEE BY WAY OF SHARE APPLICATION MONEY AND AS SUCH THE PAYMENT OF HIRE CHARGES HAS BEEN HELD AS BOGUS. THE REFORE, HE HAS TREATED THE SAME AS UN-EXPLAINED INCOME OF THE ASSESSEE UNDER SECTION 68 OF INCOME TAX ACT. HOWEVER, IT MAY BE MENTIONED THAT THIS OBSERVATION OF THE AO HAS BEEN HELD TO BE WITHOUT ANY BASIS AS AFORESAID. THEREFORE, THE MATT ER NEEDS TO BE ITA NO.1220/DEL./2010 ITA NO.743/DEL./2013 3 EXAMINED IN VIEW OF THE PROVISIONS OF SECTION 68 OF THE INCOME TAX ACT. THE LD. CIT(A) HAS ALSO MADE THE GENERAL O BSERVATION IN RESPECT OF THIS ISSUE. THE MATTER HAS NOT BEEN E XAMINED IN PROPER PERSPECTIVE. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT IT IS IN THE INTEREST OF JUSTICE THE MATTER NEEDS T O BE SET ASIDE AND RESTORE TO THE FILE OF THE AO FOR CONSIDERING SAME IN ACCORDANCE WITH THE LAW AFTER AFFORDING A REASONABLE OPPORTUNI TY OF BEING HEARD TO THE ASSESSEE. IT IS ORDERED ACCORDINGLY. 5. PURSUANT TO THE ABOVE ORDER, THE AO, IN AN OR DER OF ASSESSMENT DATED 07.05.2008 REPEATED THE ADDITION WHICH HAS BEEN CON FIRMED IN APPEAL BY THE CIT(A) BY ORDER DATED 02.02.2010 ON THE FOLLOWING R EASONS :- 2.7 THE SHORT QUESTION TO BE ANSWERED AS TO WHETHE R IN THE FACTS AND IN THE CIRCUMSTANCES OF THE PRESENT CASE THE AO WAS RIGHT IN TREATING RS.3,05,000/- AS UNEXPLAINED INCOME IN THE HANDS OF THE APPELLANT. 2.8 IN THE PRESENT CASE IN ORDER TO ESTABLISH THE C REDITWORTHINESS, IT WAS SHOWN THAT RS.3,05,000/- HAS BEEN RECEIVED F ROM FIVE PERSONS. WHEN THE IDENTITY OF THE PERSONS FAIL, IT WILL BE NO POINT AT THIS STAGE TO GO FOR OTHER TWO CRITERIA I.E. CRE DITWORTHINESS OF THE INVESTOR AND THE GENUINENESS OF TRANSACTION. TW O PERSONS OUT OF FIVE INVESTORS NEVER APPEARED AND THREE PERSONS WHO APPEARED FAILED TO ESTABLISH THEIR CREDITWORTHINESS. 2.9 ON THESE MATERIALS, NO ONE CAN FORM AN OPINION THAT THIS APPLICANT/CREDITOR HAD ANY INCOME EXIGIBLE TO TAX U NDER INCOME TAX LAWS. SINCE IT IS NOT KNOWN WHETHER THESE FIVE INVESTORS DID HAVE ANY SOURCE OF INCOME OR BUSINESS WHICH COULD B E DERIVED AND WHICH COULD HELP THEM TO INVEST RS.3,05,000/- B Y WAY OF SHARE CAPITAL/CASH CREDIT. THEREFORE, ON THE BASIS OF MATERIAL PRODUCED, IT WAS NOT JUST POSSIBLE FOR ANY REASONAB LE MAN TO FORM AN OPINION WITH REGARD TO CREDITWORTHINESS OF THE I NVESTOR/ENTRY OPERATOR. THERE IS NO MATERIAL EVIDENCE ON RECORD T O ESTABLISH THAT THE AMOUNT WAS HELD BY THESE FIVE INVESTORS TO PROV E ITS CREDITWORTHINESS. ITA NO.1220/DEL./2010 ITA NO.743/DEL./2013 4 6. BEFORE US THE LD. COUNSEL CONTENDED THAT SINCE T HE ORDER OF THE CIT(A) IS AN EX-PARTE ORDER, THE ISSUE OF NON-RECORDING OF STATEMENTS BY THE AO OF THE TWO PARTIES WERE NOT DISCUSSED BY THE CIT(A). HE CO NTENDED THAT IN THE SECOND ROUND, THE PARTIES WERE IN FACT PRODUCED, WH O RECONFIRMED THE INVESTMENTS AND PRODUCED EVIDENCE WITH REGARD TO ID ENTITY AND SOURCES. IT WAS SUBMITTED THAT THE AUTHORITIES BELOW HAVE IGNORED T HE FACT THAT THESE PARTIES WERE FOUND TO BE NOT GENUINE WITH REGARD TO PAYMENT OF HIRE CHARGES BY ACCOUNT PAYEE CHEQUES, WHICH PAYMENTS WARE HELD BY THE TRIBUNAL TO BE GENUINE PAYMENTS MADE TO GENUINE PERSONS. IT WAS, T HEREFORE, PRAYED THAT THE ADDITION BE DELETED. 7. THE LD. DR SUPPORTED THE ORDER OF THE LD. CIT(A) AND DOES NOT WANT US TO INTERFERE IN THE SAME. 8. WE HAVE HEARD BOTH THE PARTIES. THE ISSUE IS RES TRICTED TO SUM RECEIVED BY WAY OF SHARE CAPITAL FROM THE FOLLOWING PARTIES :- (I) MOHD.ASLAM RS.1,20,000/- (II) RAJINDER SINGH RS. 30,000/- (III) VIJAY CHAUHAN RS. 80,000/- (IV) DINESH DUBEY RS. 50,000/- (V) ASHOK DUBEY RS. 25,000/- TOTAL : RS.3,05,000/- ADMITTEDLY, OUT OF THE FIVE PARTIES, THREE PARTIES, NAMELY, MOHAMED ASLAM (RS.1,20,000/-), RAJINDER SINGH (RS.30,000/-) AND V IJAYPAL SINGH (RS.80,000) ITA NO.1220/DEL./2010 ITA NO.743/DEL./2013 5 APPEARED BEFORE THE AO AND CONFIRMED THE INVESTMENT . THE AO DISBELIEVED THE STATEMENT ON THE GROUND THAT IN HIS OPINION, PA RTIES DID NOT HAVE CREDITWORTHINESS TO MAKE THE INVESTMENT, KEEPING IN VIEW OF THE STATED SOURCES OF INCOME. THE ASSESSEE, HOWEVER, CONTENDS THAT BY PRODUCING ALL THE THREE PARTIES BEFORE THE AO AND FILING THE CONFIRMA TION, BANK STATEMENT OF THE SHARE HOLDERS, SHARE-CERTIFICATE, THE ASSESSEE HAS DISCHARGED ITS ONUS IN RESPECT TO SECTION 68 OF THE ACT. ACCORDING TO THE AR, AO I S ASKING THE ASSESSEE, TO PROVE THE SOURCE OF SOURCE WHICH IS NOT PERMISSIBLE . WE NOTICE THAT THE TRIBUNAL, IN THE FIRST ROUND, HAS HELD THAT THE ADD ITION WAS MADE ON THE ASSUMPTION THAT THE HIRE-CHARGES WERE RETURNED TO T HE ASSESSEE AS SHARE APPLICATION MONEY, AND AS SUCH PAYMENT OF HIRE-CHAR GES WAS HELD AS BOGUS. THIS BASIS OF DISALLOWANCE OF HIRE- CHARGES WAS NOT ACCEPTED BY THE TRIBUNAL. BUT THE MATTER WAS SET-ASIDE TO EXAMINE THE APPLICA BILITY OF SECTION 68 OF THE ACT. IN THE INSTANT CASE WE FIND THAT THE ASSESSEE BY LEADING EVIDENCE OF CONFIRMATION, BANK-STATEMENT AND PRODUCTION OF THRE E SHARE-HOLDERS HAS DISCHARGED ITS INITIAL ONUS. THE AUTHORITIES BELOW HAVE NOT LED ANY COGENT EVIDENCE OTHER THAN TO DISBELIEVE THE EXPLANATION O F THE SHARE HOLDERS. IN VIEW THEREOF, WE DELETE THE ADDITION OF RS.2,35,000/-. H OWEVER, SO FAR AS OTHER TWO SHARE-HOLDERS, NAMELY, ASHOK DUBEY AND DINESH DUBEY , ARE CONCERNED, NO RELEVANT EVIDENCE HAS BEEN LED TO DISCHARGE THE INI TIAL ONUS U/S 68 OF THE ACT. NEITHER FROM THE ORDERS BELOW NOR FROM THE SYNOPSIS IT IS APPARENT THAT ANY ITA NO.1220/DEL./2010 ITA NO.743/DEL./2013 6 RELEVANT EVIDENCE WAS PLACED ON RECORD. THE CONTENT ION OF THE LD. AR THAT BOTH THE PARTIES APPEARED LATE BEFORE THE AO, IS NO T DISCERNIBLE FROM ANY EVIDENCE PLACED ON RECORD AND THEREFORE REJECTED. T HEREFORE, WE CONFIRM THE ADDITION OF THESE TWO PARTIES. I.E. RS.75,000/-. 9. IN THE RESULT THE QUANTUM APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 10. COMING NEXT TO THE PENALTY APPEAL, SINCE WE HAV E DELETED AN ADDITION OF RS.2,35,000/-AND CONFIRMED AMOUNT OF RS 75,000/-, A CCORDINGLY, THE PENALTY LEVIED IN RESPECT OF ADDITION RS.2,35,000/- IS DELE TED AND IN RESPECT OF ADDITION OF RS.75,000/- IS CONFIRMED. 11. IN THE RESULT, THE PENALTY APPEAL IS PARTLY AL LOWED. 12. TO SUM UP: IN THE RESULT, BOTH THE APPEALS FILE D BY THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 27 TH DAY OF NOVEMBER, 2015. SD/- SD/- (N.K. SAINI) (A.T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 27 TH DAY OF NOVEMBER, 2015 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XI, NEW DELHI 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.