Neetrash Consultants P.Ltd, New Delhi V. ITO, Ward-13(2), New Delhi

ITA 7875/DEL/2019

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 1088 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Next Hearing Date: 13-07-2022
• Assessment Year: 2004-2005
• Appeal Filed On: 26-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 147; 148; 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘SMC’ NEW DELHI SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA No.7875/Del/2019 Assessment Year: 2004-05 M/s. Neetrash Consultants Pvt. Ltd., 84, Pocket-I, Jasola, New Delhi - 110025 Vs. ITO, Ward 13(4), New Delhi PAN :AAACN0625K (Appellant) (Respondent) ORDER This is an appeal by the assessee against order dated 31.07.2019 of learned Commissioner of Income-Tax(Appeals)-39, New Delhi pertaining to assessment year 2004-05. Effective grounds raised by the assessee are as under: 1. The Ld. CIT(A) has erred in confirming the assessment at the income of Rs.3,00,814/- as against the returned income of Rs.1,000/-. 2. The Ld. CIT(A) has erred in confirming the re-opening the assessment u/s. 148 merely on presumption and having no adverse material on record. Appellant by Shri Anil Kumar Jain, Advocate Respondent by Shri Om Parkash, Sr. DR Date of hearing 14.07.2022 Date of pronouncement 12.10.2022 2 ITA No.7875/Del. 3. The Ld. CIT(A) has erred in confirming the addition of Rs.1,00,000 on account of share application money received from Rapid Impex Pvt. Ltd. and has also erred in recording the receipt as a paper transaction. 4. The Ld. CIT(A) has erred in confirming the addition of Rs.1,92,500/- on account of sale consideration of shares of M/s.Taurus Packaging Pvt. Ltd. received from M/s. Globetch Solutions Pvt. Ltd. and has also erred in recording the receipt as a paper transaction. 5. The Ld. CIT(A) has erred in confirming the disallowance of Long term capital gain of Rs.11,236/- derived by the assessee on the sale of shares of M/s. Taurus Packaging Pvt. Ltd. 6. The Ld. CIT(A) has erred in confirming the addition of Rs.7,313/- being the amount of alleged commission paid to M/s.Rapid Impex Pvt. Ltd. and M/s. Globetech Solutions Pvt. Ltd. for the transaction of Rs.1,00,000 and Rs.1,92,500/- with them respectively. 2. Briefly, the facts are, the assessee is a resident corporate entity. For the assessment year under dispute, assessee filed its return of income on 25.11.2004 declaring income of Rs.1,000. The return of income filed by the assessee was processed under Section 143(1) of the Income-Tax Act, 1961. Subsequently, the Assessing Officer received information that the assessee is a beneficiary of accommodation entries provided in the form of share application money for issue of equity shares and long term capital gain on sale of 3 ITA No.7875/Del. shares. Based on such information, the Assessing Officer reopened the assessment under Section 147 of the Act. 3. In course of assessment proceedings, the Assessing Officer called upon the assessee to prove the genuineness of the aforesaid transactions. In response to the query raised by the Assessing Officer, the assessee furnished explanation stating that it has received an amount of Rs.1,00,000 from M/s. Rapid Impex Pvt. Ltd. through cheque as share application money for issue of 10,000 equity shares having face value of Rs.10 per share. Further, it was submitted, assessee received an amount of Rs.1,92,500 from M/s. Globetech Solution Pvt. Ltd. through cheque towards sale of 17,500 shares of M/s. Taurus Packaging Pvt. Ltd. Assessing Officer, however, disbelieved the contention of the assessee on the reasoning that as per the information available on record, the concerned parties, who have entered into transaction with the assessee do not have any business activity or creditworthiness to invest money towards share application and purchase of shares, respectively. 4. Having held so, he treated the amount received by the assessee towards share application money and sale of shares as unexplained 4 ITA No.7875/Del. cash credit and added to the income of the assessee. Further, being of the view that the amount received towards share application money and consideration for sale of shares are in the nature of accommodation entry, the Assessing Officer added an amount of Rs.7,03,013 for alleged commission for availing accommodation entries. Since, he treated the sale of shares as paper transaction, he treated the long term capital gain offered by the assessee as bogus and reduced it from long term capital gain resulting in long term capital loss. Against the assessment order so passed, the assessee preferred an appeal before learned Commissioner (Appeals). However, the first appellate authority did not interfere with the assessment order. 5. At the time of hearing, learned counsel appearing for the assessee submitted that reopening of assessment is without any valid reason. Drawing my attention to reasons recorded for reopening of assessment, learned counsel for the assessee submitted that simply based on the information received from the Investigation Wing, the assessing officer has reopened the assessment without proper application of mind. Thus, he submitted, the reopening of assessment under Section 147 of the Act is invalid. 5 ITA No.7875/Del. 6. As regards, the merits of the issue, learned counsel for the assessee submitted, share application money of Rs.1,00,000 was received from M/s. Rapid Impex Pvt. Ltd. through account payee cheque. He submitted, subsequently, equity shares were allotted to the said company. He submitted, in course of assessment proceedings, assessee had furnished various documentary evidences relating to the share applicant, such as, income-tax return copy, company master data with Registrar of Companies (ROC), confirmation to establish the identity of the share applicant. He submitted, simply relying upon a statement recorded from one Shri S.H. Malik, the assessing officer made the addition, that too, without allowing cross-examination to the assessee, inspite of a specific request being made by the assessee. Further, drawing my attention to the statement recorded, learned counsel submitted, nowhere the concerned person has referred to the name of either M/s. Rapid Impex Pvt. Ltd. or M/s. Globetec Solution Pvt. Ltd. Therefore, the conclusion of the assessing officer that these two entities are controlled by Shri S.H. Malik is without any basis. As regards the sale of shares of Taurus Packaging Pvt. Ltd. to M/s. Globetec Solution Pvt. Ltd., learned counsel submitted, the entire 6 ITA No.7875/Del. transaction was carried out through banking channel and all documentary evidences including copy of ITR, company master data with ROC and confirmation were furnished by the assessee. He submitted, merely because turnover of the company is shown at lesser figure cannot lead to the conclusion that the transaction is ingenuine. Thus, he submitted, the addition made should be deleted. 7. The learned Departmental Representative relied upon the observations of the assessing officer and learned Commissioner (Appeals). 8. I have considered rival submissions and perused the material available on record. 9. As regards the issue relating to the validity of reopening of assessment under Section 147 of the Act, admittedly, the return of income filed by the assessee was not subjected to scrutiny but was only process under Section 143(1) of the Act. Therefore, the assessing officer had no occasion to verify various issues relating to assessee’s affairs in the year under consideration. It is a fact on record that subsequent to processing of return of income under Section 143 (1) of the Act, the assessing officer received information from the 7 ITA No.7875/Del. Investigation Wing indicating that the amount received by the assessee towards share application money and sale of shares are not genuine. 10. Based on such information, the assessing officer had reopened assessment under Section 147 of the Act. Thus, it is a fact on record that at the time of reopening of assessment, the assessing officer had tangible material to form prima facie belief that income had escaped assessment. At that stage, the final outcome of the proceeding is not relevant. Hence, the assessing officer was not required to conclusively establish the fact of escapement of income. That being the position in law, I do not find any merit in assessee’s challenge regarding validity of reopening of assessment under Section 147 of the Act. Accordingly, I hold that the assessing officer has validly reopened the assessment under Section 147 of the Act. 11. As regards the merits of the additions made, undisputedly, the assessee had received share application money of Rs.1,00,000 from M/s. Rapid Impex Pvt. Ltd. It is evident, the aforesaid amount was received through banking channel and duly recorded in the books of account. Further, to establish the identity and creditworthiness of the creditors, assessee had furnished copy of ITR, master data from ROC 8 ITA No.7875/Del. and confirmation. This fact has been accepted by the assessing officer. The reasons for which the assessing officer treated the share application money as unexplained cash credit are because he was of the view that share applicant is an entity controlled by one Shri S.H. Malik, an entry provider and secondly, the income offered by share applicant is not enough to prove the creditworthiness. 12. Of course, the assessing officer has also alleged that neither the assessee was able to produce the share applicant nor he appeared in response to the summons issued. On a perusal of statement recorded from Shri S.H. Malik, a copy of which is at page 27 of the paper book, I do not find any mention of M/s. Rapid Impex Pvt. Ltd., therefore, on what basis, the departmental authorities concluded that it is controlled by Shri S.H. Malik is not known. At least, no corroborative evidence to establish control of Shri S.H. Malik on the share applicant has been brought on record. 13. In course of proceedings before the departmental authorities, the assessee had produced ITR copy, ROC master data and confirmation. These documents certainly prove the identity of the share applicant. The very fact that the status of the share applicant is appearing as 9 ITA No.7875/Del. active in the ROC master data proves that the company is in existence. This is further corroborated by the fact that for the assessment year under dispute, the company has filed income tax return in Delhi jurisdiction. Thus, the share applicant company is in the roll of the department. In case, the assessee was unable to produce the company and the summons issued were not responded, the assessing officer could very well have obtain necessary information regarding the share applicant company through the assessing officer having jurisdiction over the share applicant company. No such inquiry has been conducted by the assessing officer. It is a further fact on record that despite of assessee’s specific request for cross-examination of Shri S.H. Malik, whose statement was heavily relied upon by the assessing officer for making the addition, no cross-examination was allowed. All these facts lead to conclude that the assessing officer has not followed due process of law while making the addition. Even otherwise also, facts on record reveal that the additions were made on conjecture and surmises by entertaining doubts regarding the genuineness of the transaction. It is fairly well settled, suspicion, howsoever, strong cannot take place of evidence. 10 ITA No.7875/Del. 14. In view of the aforesaid, I hold that the amount of Rs.1,00,000 representing share application money received from M/s. Rapid Impex Pvt. Ltd., cannot be treated as unexplained cash credit under Section 68 of the Act. More so, when it is a fact on record that against the share application money, the assessee has issued equity shares to the concerned party. 15. As regards, sale of shares of M/s. Taurus Packaging Pvt. Ltd. to M/s. Globetec Solution Pvt. Ltd., facts are more or less identical with the share application money received from M/s. Rapid Impex Pvt. Ltd. In this regard, the assessing officer has primarily relied upon the statement of Shri S.H. Malik to conclude that the share transaction is ingenuine. However, as discussed earlier, in the statement recorded from Shri S.H. Malik, the name of M/s. Globetec Solution Pvt. Ltd. does not appear. The assessee has also furnished various documentary evidences, such as, copy of ITR, company master data of ROC, confirmation etc. to prove the identity and creditworthiness. Further, the transaction has been carried out through banking channel. Therefore, my reasoning for not sustaining the addition of share 11 ITA No.7875/Del. application money of Rs. 1,00,000 received from M/s. Rapid Impex Pvt. Ltd. would also apply to this transaction as well. 16. In view of the aforesaid, I delete the addition of Rs.2,92,500. As a natural corollary, the disallowance of long term capital gain of Rs.11,236 also stands deleted. For the very same reason, the addition of Rs.7313, being the alleged commission paid is also deleted. 17. In the result, the appeal is partly allowed. Order pronounced in the open court on 12 th October, 2022. Sd/- (SAKTIJIT DEY) JUDICIAL MEMBER Dated: 12 th October, 2022. Mohan Lal Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi