M/s. Riwaaz Investments Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 79/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74373 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 19-02-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 04-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Onus to prove
• Section: 143(3); 131; 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F: NEW DELHI BEFORE SHRI J. S. REDDY, ACCOUNTANT MEMBER AND SHRI RAJPAL YADAV, JUDICIAL MEMBER I.T.A.NO.79/DEL/2013 ASSESSMENT YEAR : 2004-05 RIWAAZ INVESTMENTS PVT. LTD. VS. ITO COTTAGE 13A, FLAT NO. G-5 WARD-15(4) WEST PATEL NAGAR, NEW DELHI. NEW DELHI. PAN: AAACR5777Q. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAMESH GOEL , C. A, RESPONDENT BY : MS. MEENAKSHI VOHR A.SR.DR. O R D E R PER J. S. REDDY, ACCOUNTANT MEMBER THIS APPEAL FILED BY THE ASSESSEE, IS DIRECTED AGA INST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-XVIII, NEW DELHI DATED 22.10.2012. 2. FACTS IN BRIEF, THE ASSESSEE IS A COMPANY AND HA D FILED ITS RETURN DECLARING INCOME OF RS.16,360/- ON 31.08.2004, WHIC H WAS PROCESSED U/S 143(1). LATER A NOTICE U/S 148 WAS ISSUED. THE ASSE SSING OFFICER PASSED AN ORDER U/S 143(3) ADDING AN AMOUNT OF RS. 5 LAC AS I NCOME U/S 68, ON THE GROUND THAT THE ASSESSEE HAS RECEIVED BOGUS ACCOMMO DATION ENTRIES FROM 2 M/S HOPEWIN ADMARK AND CONSULTANCY SERVICES PVT. LT D., BASED ON INFORMATION RECEIVED FROM THE INVESTIGATION WING. 4. THE ASSESSEE CARRIED THE MATTER IN APPEAL WITHOU T SUCCESS. 5. BEFORE US THE ASSESSEE CHALLENGED THE REOPENING . ON MERITS HE SUBMITTED THAT THE ASSESSEE HAD FILED THE FOLLOWING DOCUMENTS BEFORE THE A.O. AND HENCE DISCHARGED ITS BURDEN OF PROOF. THE ASSESSEE HAS FILED FOLLOWING DOCUMENTS VIDE TH EIR LETTER DATED 14.12.2011 AND 28.12.2011: 1. SHARE APPLICATION FROM RECEIVED FROM HOPEWIN ADM ARK & CONSULTANCY SERVICES (PVT.) LTD. 2. CONFIRMATION RECEIVED FROM ABOVE SAID COMPANY. 3. PHOTOCOPY OF ITR ACKNOWLEDGEMENT FOR THE ASSESSM ENT YEAR 2004-05 RECEIVED FROM THE ABOVE SAID COMPANY. 4. BALANCE SHEET & PROFIT & LOSS A/C FOR THE YEAR E NDED 31.03.2004 RECEIVED FROM THE ABOVE SAID COMPANY. 5. AFFIDAVIT RECEIVED FROM MR. HARISH KUMAR AGGARWA L DIRECTOR OF M/S HOPEWIN ADMARK & CONSULTANCY SERVIC ES (PVT.) LTD. CONFIRMING THE PURCHASE OF SHARES. 6. MASTER DATA OF M/S HOPEWIN ADMARK & CONSULTANCY SERVICES (PVT.) LTD. (PRINT FROM MCA WEBSITE ON DAT ED 28.12.2011) IN WHICH THE STATUS OF THE COMPANY. 7. BALANCE SHEET OF M/S HOPEWIN ADMARK & CONSULTANC Y SERVICES (PVT.) LTD. FOR THE YEAR ENDED 31.03.2010 AND 31.03.2008. 8. ITR ACKNOWLEDGEMENT OF M/S HOPEWIN ADMARK & CONSULTANCY SERVICES (PVT.) LTD. 3 6. THUS, HE SUBMITS THAT THE ADDITION MADE IS BAD I N LAW. 7. CERTAIN CASE LAWS HAVE BEEN RELIED UPON AND IT W AS ARGUED THAT THE ASSESSING OFFICER HAS NOT MADE ANY INVESTIGATION OR ENQUIRY, BEFORE REJECTING THE EVIDENCE FILED BY THE ASSESSEE. WE WOULD DEAL WITH THE SAME LATER IN THIS ORDER. 8. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND RELIED ON THE ORDER OF THE ASSESSING OFFICER AS WELL AS THE LD. C IT (A) AND ARGUED THAT INFORMATION WAS RECEIVED FROM THE INVESTIGATION WIN G THAT THIS ENTRY IS CONSIDERED AS AN ACCOMMODATION ENTRY AND HENCE THE ADDITION WAS RIGHTLY MADE. RELIANCE WAS PLACED ON THE JUDGMENT OF THE JU RISDICTIONAL HIGH COURT IN THE CASE OF M/S NOVA PROMOTERS AS WELL AS IN TH E CASE OF M/S FINLEASE PVT. LTD., JUDGMENT DATED 15.02.2012. HE ALSO RELI ED ON THE CASE LAWS REFERRED TO BY THE FIRST APPELLATE AUTHORITY. 9. ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUM STANCES AND A PERUSAL OF THE PAPERS ON RECORD AND THE ORDERS OF THE AUTHO RITIES BELOW, WE HOLD AS FOLLOWS: THE UNDISPUTED FACT IS THAT THE ASSESSING OFFICER HAS NOT CONDUCTED ANY ENQUIRY IN THIS CASE. THE ASSESSEE HAS GIVEN E VIDENCE AND DOCUMENTS SUCH AS SHARE APPLICATION FORM, CONFIRMATION LETTE RS, COPY OF TAX RETURNS, BALANCE SHEETS, AFFIDAVITS ETC. WHICH ARE LISTED I N PARA 5 OF THIS ORDER. 4 10. THERE IS NO INVESTIGATION MUCH LESS ENQUIRY MAD E BY THE ASSESSING OFFICER. THERE IS NO EVIDENCE WITH THE ASSESSING OFFICER TO DISBELIEVE THE EVIDENCES AND DOCUMENTS FILED BY THE ASSESSEE. MERE REJECTION OF THESE EVIDENCES ON THE GROUND THAT THE ASSESSEE HAS CREAT ED A PAPER TRIAL IS NOT CORRECT. THE ASSESSEE HAS DISCHARGED THE BURDEN OF PROOF THAT LAY ON IT. NOW THE ONUS SHIFTED TO REVENUE AND THIS IN OUR VIEW WA S NOT DISCHARGED BY THE AO. THE ASSESSING OFFICER IN THIS CASE DID NOT COND UCT ANY ENQUIRY OR INVESTIGATION, BUT MERELY REJECTED THE EVIDENCE GIV EN BY THE ASSESSEE. THIS IS NOT PERMISSIBLE IN LAW. 11. WE NOW DISCUSS THE CASE LAW ON THE ISSUE. (A) IN THE CASE OF CIT VS. VICTOR ELECTRODES LTD. 329 ITR 271, (DELHI), IN PARA 8 AT PAGE 274 AND 275 HELD AS UNDER: HELD, DISMISSING THE APPEAL, THAT IT HAD NOT BEEN DISPUTED THAT THE SHARE APPLICATION MONEY WAS RECEIVED BY THE ASS ESSEE BY WAY OF ACCOUNT PAYEE CHEQUES, THROUGH NORMAL BANKING CH ANNELS. ADMITTEDLY, COPIES OF APPLICATION FOR ALLOTMENT OF SHARES WERE ALSO PROVIDED TO THE ASSESSING OFFICER. IT WAS THE CASE OF THE REVENUE THAT THE SHARE APPLICATIONS WERE NOT SIGNED ON BEHALF OF THE REVENUE THAT THE SHARES WERE NOT ACTUALLY ALLOT TED TO THE COMPANIES. IF THE ASSESSING OFFICER HAD ANY DOUBT ABOUT THE IDENTITY OF THE SHARE APPLICANTS, HE COULD HAVE SUM MONED THE DIRECTORS OF THE APPLICANT-COMPANIES. NO SUCH ATTE MPT WAS, HWOEVER, MADE BY HIM. THEREFORE, THE CIT(A) AND TH E TRIBUNAL WERE JUSTIFIED IN HOLDING THAT THE IDENTITY OF THE SHARE APPLICANTS AND THE GENUINENESS OF THE TRANSACTIONS HAD BEEN ES TABLISHED BY THE ASSESSEE. THE AMOUNT WAS NOT ASSESSABLE UNDER SECTION 68. 5 (B) HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. PR ADEEP GUPTA 207 CTR 115, HAS BEEN RELIED UPON BY THE DELHI ITA T IN THE ORDER IN THE CASE OF BABITA GUPTA, IN ITA NO. 2897/06, WHEREIN IT IS HELD THAT IN THE FACTS OF THE CASE B EFORE US IT MAY BE SEEN THAT FROM THE VERY BEGINNING LD. ASSESSING OFF ICER HAD SHIFTED ENTIRE BURDEN UPON THE ASSESSEE AND NO MATE RIAL WAS BROUGHT BY HIM TO PROVE HIS ALLEGATION THAT THE IMP UGNED AMOUNT REPRESENTED ASSESSEE COMPANYS UNDISCLOSED INCOME. THEREFORE, ON THE GROUND ALONE THE ENTIRE ADDITION DESERVES TO BE DELETED AND MAY KINDLY BE HELD SO. (EMPHASIS OURS). (C ) IN CASE OF CIT VS. JAY DEE SECURITIES AND FIN ANCE LTD. ITA 327/2010 & 159/2010 (ALLAHABAD HIGH COURT), THE HON BLE COURT HELD AS FOLLOWS: THE TRIBUNAL RECORDED FINDINGS THAT THE ASSESSEE H AD PRODUCED THAT RETURN OF INCOME FILED BY THE RELEVANT SHAREHO LDERS WHO HAD PAID SHARE APPLICATION MONEY. THE ASSESSEE HAD ALSO PRODUCED THE CONFIRMATION OF SHARE HOLDERS INDICATING THE DE TAILS OF ADDRESSES, PAN AND PARTICULARS OF CHEQUES THROUGH W HICH THE AMOUNT WAS PAID TOWARDS THE SHARE APPLICATION MONEY . THE TRIBUNAL THEREAFTER RELIED UPON THE JUDGMENT OF THE SUPREME COURT IN LOVELY EXPORTS VS. CIT (216 CTR 195 SC) WH EREIN IT WAS HELD THAT IF THE ASSESSEE PRODUCES THE NAMES, A DDRESSES, PAN DETAILS OF THE SHARE HOLDERS THEN THE ONUS ON THE A SSESSEE TO PROVE THE SOURCE OF SHARE APPLICATION MONEY STAND DISCHAR GED. IF THE ASSESSING AUTHORITY TO VERIFY THE SAME IN THE HANDS OF THE SHAREHOLDERS CONCERNED. THE TRIBUNAL HAS RELIED UPO N AN ORDER OF THE SUPREME COURT IN THE CASE OF DEVINE LEASING COMPANY REPORTED IN 207 CTR 38 (2007). IN VIEW OF THE DECISION OF THE SUPREME COURT, WE DISMISS THE APPEALS RETURNING THE QUESTION IN FAVOUR OF THE ASS ESSEE. (D) IN THE CASE OF CIT VS. GANGESHWARI METAL P.LTD. IN ITA NO.597/2012 JUDGEMENT DT. 21.1.2013, THE HONBLE HIGH COURT AFT ER CONSIDERING THE DECISIONS IN THE CASE OF NOVA PROMOTERS AND FINLEAS E PVT.LTD. 342 ITR 169 AND JDUGEMENT IN THE CASE OF CIT VS. LOVELY EXPORTS 319 ITR (SAT.5)(S.C.) HELD AS FOLLOWS. 6 AS CAN BE SEEN FROM THE ABOVE EXTRACT, TWO TYPES O F CASES HAVE BEEN INDICATED. ONE IN WHICH THE ASSESSING OFFICER CARR IES OUT THE EXERCISE WHICH IS REQUIRED IN LAW AND THE OTHER IN WHICH THE ASSES SING OFFICER SITS BACK WITH FOLDED HANDS TILL THE ASSESSEE EXHAUSTS ALL T HE EVIDENCE OR MATERIAL IN HIS POSSESSION AND THEN COMES FORWARD TO MERELY REJ ECT THE SAME ON THE PRESUMPTIONS. THE PRESENT CASE FALLS IN THE LATTER CATEGORY. HERE THE ASSESSING OFFICER AFTER NOTING THE FACTS, MERELY RE JECTED THE SAME. THIS WOULD BE APPARENT FROM THE OBSERVATIONS OF THE ASSE SSING OFFICER IN THE ASSESSMENT ORDER TO THE FOLLOWING EFFECT:- INVESTIGATION MADE BY THE INVESTIGATION WING OF TH E DEPARTMENT CLEARLY SHOWED THAT THIS WAS NOTHING BUT A SHAM TRA NSACTION OF ACCOMMODATION ENTRY. THE ASSESSEE WAS ASKED TO EXP LAIN AS TO WHY THE SAID AMOUNT OF RS.1,11,50,000/- MAY NOT BE ADDED TO ITS INCOME. IN RESPONSE, THE ASSESSEE HAS SUBMITTED TH AT THERE IS NO SUCH CREDIT IN THE BOOKS OF THE ASSESSEE. RATHER, THE ASSESSEE COMPANY HAS RECEIVED THE SHARE APPLICATION MONEY FO R ALLOTMENT OF ITS SHARE. IT WAS STATED THAT THE ACTUAL AMOUNT RE CEIVED WAS RS.55,50,000/- AND NOT RS.1,11,50,000/- AS MENTIONE D IN THE NOTICE. THE ASSESSEE HAS FURNISHED DETAILS OF SUCH RECEIPTS AND THE CONTENTION OF THE ASSESSEE IN RESPECT OF THE AMOUNT IS FOUND CORRECT. AS SUCH THE UNEXPLAINED AMOUNT IS TO BE T AKEN AT RS.55,50,000/-. THE ASSESSEE HAS FURTHER TRIES TO EXPLAIN THE SOURCE OF THIS AMOUNT OF RS.55,50,000/- BY FURNISHI NG COPIES OF SHARE APPLICATION MONEY, BALANCE4 SHEET, ETC. OF TH E PARTIES MENTIONED ABOVE AND ASSERTED THAT THE QUESTION OF A DDITION IN THE INCOME OF THE ASSESSEE DOES NOT ARISE. THIS EXPLAN ATION OF THE ASSESSEE HAS BEEN DULY CONSIDERED AND FOUND NOT ACC EPTABLE. THIS ENTRY REMAINS UNEXPLAINED IN THE HANDS OF THE ASSES SEE AS HAS BEEN ARRIVED BY THE INVESTIGATION WING OF THE DEPARTMENT . AS SUCH ENTRIES OF RS.55,50,000/- RECEIVED BY THE ASSESSEE ARE TREATED AS AN UNEXPLAINED CASH CREDIT IN THE HANDS OF THE ASSESSE E AND ADDED TO ITS INCOME. SINCE I AM SATISFIED THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF ITS INCOME, PENALTY PROCE EDINGS UNDER SECTION 271(1)(C ) ARE BEING INITIATED SEPARATELY. THE FACTS OF NOVA PROMOTERS AND FINLEASE (P) LTD. (SUPRA) FALL IN THE FORMER CATEGORY AND THAT IS WHY THIS COURT DECIDED IN FAVOUR OF THE REVENUE IN THAT CASE. HOWEVER, THE FACTS OF THE PRESENT CA SE ARE CLEARLY DISTINGUISHABLE AND FALL IN THE SECOND CATEGORY AND ARE MORE IN LINE WITH 7 FACTS OF LOVELY EXPORTS (P) LTD. (SUPRA). THERE WA S A CLEAR LACK OF INQUIRY ON THE PART OF THE ASSESSING OFFICER ONCE THE ASSES SEE HAD FURNISHED ALL THE MATERIAL WHICH WE HAVE ALREADY REFERRED TO ABOVE. I N SUCH AN EVENTUALITY NO ADDITION CAN BE MADE UNDER SECTION 68 OF THE INCOME TAX ACT, 1961. CONSEQUENTLY, THE QUESTION IS ANSWERED IN THE NEGAT IVE. THE DECISION OF THE TRIBUNAL IS CORRECT IN LAW. E) IN THE CASE OF FINLEASE PVT.LTD. 342 ITR 169 (SU PRA) IN ITA 232/2012 JUDGEMENT DT. 22.11.2012 AT PARA 6 TO 8, IT IS HELD AS FOLLOWS. 6. THIS COURT HAS CONSIDERED THE SUBMISSIONS OF TH E PARTIES. IN THIS CASE THE DISCUSSION BY THE COMMISSIONER OF INCOME TAX (A PPEALS) WOULD REVEAL THAT THE ASSESSEE HAS FILED DOCUMENTS INCLUDING CER TIFIED COPIES ISSUED BY THE ROC IN RELATION TO THE SHARE APPLICATION, AFFIDAVIT S FO THE DIRECTORS, FORM 2 FILED WITH THE ROC BY SUCH APPLICANTS CONFIRMATIONS BY THE APPLICANT FOR COMPANYS SHARES, CERTIFICATES BY AUDITORS ETC. UN FORTUNATELY, THE ASSESSING OFFICER CHOSE TO BASE HIMSELF MERELY ON THE GENERAL INFERENCE TO BE DRAWN FROM THE READING OF THE INVESTIGATION REPORT AND TH E STATEMENT OF MR.MAHES GARG. TO ELEVATE THE INFERENCE WHICH CAN BE DRAWN ON THE BASIS OF READING OF SUCH MATERIAL INTO JUDICIAL CONCLUSIONS WOULD BE IMPROPER, MORE SO WHEN THE ASSESSEE PRODUCED MATERIAL. THE LEAST THAT THE ASSESSING OFFICER OUGHT TO HAVE DONE WAS TO ENQUIRE INTO THE MATTER BY, IF NECESSARY, INVOKING HIS POWERS UNDER SECTION 131 SUMMONING THE SHARE APPLIC ANTS OR DIRECTORS. NO EFFORT WAS MADE IN THAT REGARD. IN THE ABSENCE OF ANY SUCH FINDING THAT THE MATERIAL DISCLOSED WAS UNTRUSTWORTHY OR LACKED CRED IBILITY THE ASSESSING OFFICER MERELY CONCLUDED ON THE BASIS OF ENQUIRY RE PORT, WHICH COLLECTED CERTAIN FACTS AND THE STATEMENTS OF MR.MAHESH GARG THAT THE INCOME SOUGHT TO BE ADDED FELL WITHIN THE DESCRIPTION OF S.68 OF THE INCOME TAX ACT, 1961. 7. HAVING REGARD TO THE ENTIRETY OF FACTS AND CIRCU MSTANCES, THE COURT IS SATISFIED THAT THE FINDING OF THE TRIBUNAL IN THIS CASE ACCORDS WITH THE RATIO OF THE DECISION OF THE SUPREME COURT IN LOVELY EXPORTS (SUPRA). 8. THE DECISION IN THIS CASE IS BASED ON THE PECULI AR FACTS WHICH ATTRACT THE RATIO OF LOVELY EXPORTS (SUPRA). WHERE THE ASS ESSEE ADDUCES EVIDENCE IN SUPPORT OF THE SHARE APPLICATION MONIES, IT IS OPEN TO THE ASSESSING OFFICER TO EXAMINE IT AND REJECT IT ON TENABLE GROUNDS. IN CA SE HE WISHES TO RELY ON THE REPORT OF THE INVESTIGATION AUTHORITIES, SOME MEANI NGFUL ENQUIRY OUGHT TO BE CONDUCTED BY HIM TO ESTABLISH A LINK BETWEEN THE AS SESSEE AND THE ALLEGED 8 HAWALA OPERATORS, SUCH A LINK WAS SHOWN TO BE PRESE NT IN THE CASE OF NOVA PROMOTERS & FINLEASE (P) LTD. (SUPRA) RELIED UPON B Y THE REVENUE. WE ARE THEREFORE NOT TO BE UNDERSTOOD TO CONVEY THAT IN AL L CASES OF SHARE CAPITAL ADDED UNDER SECTION 68, THE RATIO OF LOVELY EXPORTS (SUPRA) IS ATTRACTED, IRRESPECTIVE OF THE FACTS, EVIDENCE AND MATERIAL. 11.1. WE FIND THAT IN THE CASE OF NIPUN BUILDERS A ND DEVELOPERS PVT. LTD, RELIED ON BY THE LD.D.R., THE CREDITWORTHINESS OF T HE INVESTORS WAS FOUND TO BE INADEQUATE. SURROUNDING CIRCUMSTANCES WERE FOUND TO SHOW THAT M/S NIPUN BUILDERS AND DEVELOPERS DO NOT HAVE FINANCIAL CAPABILITY. IN THE CASE N. R. PORTFOLIO PVT. LTD. (SUPRA), THE ASSESSING OF FICER MADE CERTAIN ATTEMPTS TO CONTACT THE SHARE HOLDERS AND THAT WAS WITHOUT SUCCESS. THE COURT OBSERVED AS FOLLOWS IF ON VERIFICATION, OR D URING THE PROCEEDINGS, THE ASSESSING OFFICER CANNOT CONTACT THE SHARE APPLICA NT, OR THAT THE NONE OF THE DOCUMENTS ARE UNVERIFIABLE OR THEY ARE FURTHER DOU BT IN DETAILS, THE ONUS SHIFTS BACK TO THE ASSESSEE . IN THE CASE ON HAND THERE IS NO VERIFICATION WHATSOEVER DONE BY THE ASSESSING OFFICER AND THUS THE ONUS DOES NOT SHIFT TO THE ASSESSEE. HENCE THESE CASE LAWS DO NOT APPL Y TO THE FACTS OF THIS CASE.. 11.2. THE JUDGMENT IN THE CASE OF NOVA PROMOTORS RE PORTED IN 341 ITR 169 IS NOT APPLICABLE TO THE FACTS OF THIS CASE AS TH AT WAS A CASE WHERE ADMISSIONS MADE WAS SOUGHT TO BE RETRACTED. THERE IS NO ADMISSION IN THIS CASE. 9 12. APPLYING THE PROPOSITIONS LAID DOWN IN THESE C ASE LAWS TO THE FACTS OF THIS CASE, , WE DELETE THE ADDITION IN QUESTION AN D ALLOW THIS APPEAL OF THE ASSESSEE. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. PRONOUNCED IN THE OPEN COURT ON 21ST MARCH, 201 4 SD/- SD/- (RAJPAL YADAV) (J. S. REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 21 ST MARCH, 2014. COPY OF THE ORDER FORWARDED TO:- APPELLANT; RESPONDENT; CIT; CIT(A); DR BY ORDER ASST. REGISTRAR, ITAT. S. SINHA