ITO, New Delhi V. M/s. Micro Max Technologies Pvt. Ltd., New Delhi

ITA 853/DEL/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 7053 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 07-10-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 02-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K CHAND
• Keywords: Unexplained cash credit; Bogus Share capital; Gift; Accommodation entries; Onus to prove
• Section: 68; 148

Judgement Text

ITA NO. 853/DEL/2010 & CO NO. 114/DEL/2010 A.Y. 2001-02 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 853/DEL/2010 A.Y. : 2001-02 INCOME TAX OFFICER, WARD 6(4), ROOM NO. 418, CR BUILDING, I.P. ESTATE, NEW DELHI VS. M/S MICRO MAX TECHNOLOGIES PVT. LTD., P-31, WEST PATEL NAGAR, NEW DELHI (PAN: AAACM7070M) AND CO NO. 114/DEL/2010 (IN I.T.A. NO. 853/DEL/2010) A.Y. : 2001-02 M/S MICRO MAX TECHNOLOGIES VS. INCOME TAX OFFICER, PVT. LTD., WARD 6(4), P-31, WEST PATEL NAGAR, ROOM NO. 418, CR BUILDIN G, NEW DELHI IP ESTATE, NEW DELHI (PAN: AAACM7070M) (APPELLANT S ) (RESPONDENT S ) ASSEESSEE BY : SH. MANOJ KUMAR, CA DEPARTMENT BY : SH. N.K. CHAND, SR. D.R. ORDER PER BENCH THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE EMANATE OUT OF ORDER OF LD. COMMISSIONER OF INCOME T AX (APPEALS) DATED 2.12.2009 PERTAINING TO ASSESSMENT YEAR 2001-0 2. ITA NO. 853/DEL/2010 & CO NO. 114/DEL/2010 A.Y. 2001-02 2 REVENUES APPEAL 2. THE ISSUE RAISED IS THAT LD. COMMISSIONER OF INCOM E TAX (APPEALS) ERRED IN DELETING THE ADDITION OF ` 10,00 ,000/- MADE BY THE ASSESSING OFFICER U/S 68 OF THE IT ACT ON ACCOUNT OF UNEXPLAINED SHARE CAPITAL. IT HAS BEEN FURTHER URGED THAT LD. COMMIS SIONER OF INCOME TAX (APPEALS) IGNORED THE FINDINGS RECORDED BY ASSE SSING OFFICER AND THE FACT THAT THE ASSESSEE DID NOT DISCHARGE THE ON US OF PROVIDING THE CREDITWORTHINESS OF THE CREDITORS AND GENUINENESS O F THE TRANSACTION. 3. IN THIS CASE THE ASSESSMENT WAS COMPLETED U/S 143( 3. SUBSEQUENTLY, NOTICE U/S 148 WAS ISSUED. IN THE R EASSESSMENT PROCEEDINGS ASSESSING OFFICER OBSERVED THAT ASSES SEE HAS RECEIVED DURING THE YEAR SHARE APPLICATION MONEY TOTALING TO ` 10,00,000/- FROM FOLLOWING PERSONS:- I) DINANATH LAHURIWALA SPINNING MILLS PVT. LTD. - ` 5,00,000/- II) PERFORMANCE TRADING & INVEST PVT. LTD. - ` 3,00,000/- III) TEHNOCOM ASSOCIATES PVT. LTD. - ` 2,00,000/- 3.1 HE FURTHER OBSERVED THAT INVESTIGATION WING OF THE DEPARTMENT HAD UNEARTHED A HUGE MONEY LAUNDERING OPERATION AND SEND THE REQUISITE INFORMATION TO THE FIELD FORMATIONS. IT W AS ALLEGED THAT THE ASSESSEE HAD RECEIVED CHEQUES IN LIEU OF CASH PAYMEN TS FROM THE ENTRY OPERATORS PROVIDING ACCOMMODATION ENTRIES. AS REGARDS THE ASSESSEE, HE OBSERVED TO TRACE OUT THE TRAIL OF MON EY THE DETAILS WERE CALLED FOR FROM THE BANKS. THE RESULTS OF THE INVE STIGATION DONE DURING THE ASSESSMENT PROCEEDINGS ARE AS UNDER:- I) M/S DINANATH LAHURIWALA SPINNING MILLS PVT. HAD GI VEN ` 5,00,000/- TO THE ASSESSEE COMPANY VIDE CHEQUE NO. ITA NO. 853/DEL/2010 & CO NO. 114/DEL/2010 A.Y. 2001-02 3 495651 OF OBC MINTO ROAD. FROM THE PERUSAL OF THE BA NK STATEMENT OF THIS PARTY IT IS SEEN THAT CASH HAS BE EN DEPOSITED BEFORE ISSUING THE ABOVE CHEQUE TO THE ASSESSEE. II) SIMILARLY, M/S PERFORMANCE TRADING & INVESTMENT PVT. LTD. & M/S TECHNOCOM ASSOCIATES PVT. LTD. ARE HAVING THEIR B ANK ACCOUNTS IN STATE BANK OF PATIALA, DARYA GANJ, NEW DEL HI, AND THEY TOO HAVE DEPOSITED CASH IN THEIR ACCOUNTS BEFORE ISSUING THE CHEQUES TO THE ASSESSEE. THE ASSESSEE WAS CONFRONTED WITH THESE FACTS AND H E WAS ASKED TO PRODUCE THESE PARTIES FOR NECESSARY VERIFI CATIONS, AS TO THE SOURCE OF THE CASH DEPOSITED. THE ASSESS EE FAILED TO PRODUCE THE PARTIES OR ANY CONFIRMATIONS, AS ON DATE, FROM THEM. THEREAFTER, THE ASSESSING OFFICER OBSERVED THAT IT IS A SETTLED PRINCIPLE OF LAW THAT WHEN GENUINENESS AND CREDITWORTHINESS IS UNDER DOUBT, IT IS THE DUTY OF THE ASSESSEE TO PROVE THE GENUINENESS AND CREDITWORTHINESS OF CREDI T APPEARING IN THE BOOKS, BUT THE ASSESSEE HAS MERELY FILED CER TAIN CONFIRMATIONS ON THE PART OF THE SHARE HOLDERS. HE FURTHER STATED THAT IN HIS STATEMENT THE ENTRY PROVIDER HAD CATEGO RICALLY STATED THAT WHEN THEY PROVIDE CHEQUE IN LIEU OF CASH TO TH E BENEFICIARIES THEN THEY ALSO SIGNED SOME PAPER WHICH WERE HANDED-O VER TO THESE BENEFICIARIES. THESE PAPERS MIGHT BE THE CON FIRMATION DEEDS OR GIFT DEEDS. FROM THE ABOVE, ASSESSING OFFI CER INFERRED THAT THE ABOVE CLEARLY STATED THAT THE ASSESSEE G OT THE CONFIRMATION FROM THE ENTRY OPERATORS ONLY AT THE TIME OF ITA NO. 853/DEL/2010 & CO NO. 114/DEL/2010 A.Y. 2001-02 4 RECEIVING CREDITS. HENCE HE PROCEEDED TO ADD A SU M OF ` 10,00,000/- U/S 68 OF THE IT ACT AS UNDISCLOSED INC OME OF THE ASSESSEE. 4. ASSESSEE APPEALED AGAINST THE JURISDICTION AS WEL L AS THE MERITS OF THE CASE BEFORE THE LD. COMMISSIONER OF INCOME TA X (APPEALS). LD. COMMISSIONER OF INCOME TAX (APPEALS) DISMISSED THE ISS UE OF JURISDICTION. AS REGARDS THE MERITS OF THE CASE LD. COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT DURING THE ASSES SMENT PROCEEDINGS THE ASSESSEE HAD FURNISHED ALL THE NEC ESSARY AND RELEVANT DOCUMENTS LIKE CONFIRMATION, APPLICATION OF ALLOTMENT OF SHARES, BANK STATEMENTS, ACKNOWLEDGEMENT OF ITR, IDE NTIFY PROOF FROM ALL THREE APPLICANTS FOR SHARE CAPITAL. HENCE, L D. COMMISSIONER OF INCOME TAX (APPEALS) OPINED THAT ASSESSEE COMPANY HA S DISCHARGED THE PRIMARILY ONUS TO PROVE THE IDENTITY, CREDITWOR THINESS AND GENUINENESS OF THE TRANSACTIONS. HE REFERRED THE D ECISION OF THE HONBLE JURISDICTIONAL HIGH COURT CONFIRMED BY THE HONBLE APEX COURT IN SEVERAL CASES INCLUDE THOSE OF M/S DIVINE LEASING & FINANCE LTD. AND M/S LOVELY EXPORTS PVT. LTD., WHEREIN IT WAS HELD THA T IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPAN Y FROM ALLEGED BOGUS SHARE HOLDERS WHOSE NAMES ARE GIVEN TO THE AS SESSING OFFICER THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THE IR INDIVIDUAL ASSESSMENT IN ACCORDANCE WITH LAW. ACCORDINGLY, LD . COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT THE SUM INVOLVED RECE IVED BY THE ASSESSEE AS SHARE CAPITAL CANNOT BE CONSIDERED AS UNEXPLAINED CASH CREDITS U/S 68 OF THE ACT. 5. AGAINST THIS ORDER THE REVENUE IS IN APPEAL BEF ORE US. ITA NO. 853/DEL/2010 & CO NO. 114/DEL/2010 A.Y. 2001-02 5 6. WE HAVE HEARD THE RIVAL CONTENTIONS IN THE LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. WE FIND THAT ASSESSING OFFICER HAS NOT AT ALL DOUBTED THE IDENTITY OF THE INVESTO RS. THEIR NAMES, PAN, ITR, CONFIRMATIONS, ADDRESSES WERE ALL GIVEN TO THE ASSESSING OFFICER. IT IS ALSO NOT THE CASE THAT ASSESSING OFFICER HAD IS SUED ANY NOTICE TO THEM. FURTHER, THE MAIN GROUND IS THAT THERE ARE DEP OSITS IN THE BANK ACCOUNTS OF THOSE INVESTORS BEFORE ISSUE OF CHEQUE FOR INVESTMENT IN THE ASSESSEE COMPANY. IN OUR OPINION, THIS CANNOT BE A GROUND FOR MAKING THE ADDITION AS UNEXPLAINED CASH CREDIT IN TH E HANDS OF THE ASSESSEE. IN THIS REGARD, IT WOULD BE APT TO REFER THE DECIS ION OF THE HON'BLE APEX COURT DELIVERED IN THE CASE OF CIT VS . LOVELY EXPORTS 216 CTR 195. IN THIS CASE IT WAS HELD THAT IF THE SHARE AP PLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOL DERS, WHOSE NAMES ARE GIVEN TO THE ASSESSING OFFICER, THEN THE DEPART MENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE W ITH LAW, BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE. 6.1 ACCORDINGLY, IN LIGHT OF THE AFORESAID DISCUSSI ON AND PRECEDENT, WE DO NOT FIND ANY INFIRMITY OR ILLEGALITY IN THE O RDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AND HENCE WE AF FIRM THE SAME. ITA NO. 853/DEL/2010 & CO NO. 114/DEL/2010 A.Y. 2001-02 6 ASSESSEES CROSS OBJECTION 7. IN THE C.O. THE ASSESSEE HAS AGITATED AGAINST THE REOPENING CONFIRMED BY THE LD. COMMISSIONER OF INCOME TAX (APPEA LS). HOWEVER, BEFORE US THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT HE SHALL NOT BE PRESSING FOR THE CROSS OBJECTION AND A CCORDINGLY THE CROSS OBJECTION IS DISMISSED AS NOT PRESSED. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED AND C.O. FILED BY THE ASSESSEE IS DISMISSED AS NOT PRESS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 8/10/2010. SD/- SD/- [A.D. JAIN] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE 8/10/2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES