M/s. Bahubali Rubber (P) Ltd., New Delhi V. CIT, New Delhi

ITA 863/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3912 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 02-06-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 03-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GEETMALA MOHANANI
• Keywords: Bogus Share capital; Accommodation entries
• Section: 143(3); 68; 263

Judgement Text

ITA NO.863/DEL/2010 1 IN THE INCOME TAX APPELLAT E TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI G.E. VEERABHADRAPPA, VICE PRESIDENT AND SHRI A.D. JAIN, JUDICIAL MEMBER ITA NO.863/DEL/2010 ASSTT. YEAR: 2005-06 BAHUBALI RUBBER (P) LTD., VS COMMISSIONER OF INCOME TAX G-316, PREET VIHAR, DELHI-1, NEW DELHI. NEW DELHI. (PAN/GIR NO.AACCB 2783N) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI ANIL SHARMA RESPONDENT BY: MS GEETMALA MOHANANI, CIT, DR O R D E R PER A.D. JAIN, JUDICIAL MEMBER THIS IS ASSESSEES APPEAL FOR ASSTT. YEAR 2005-06 AGAINST THE ORDER DATED 28.1.2010 PASSED BY THE LD. CIT, DELHI-I U/S 263 OF THE I.T. ACT. 2. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD FILED A CONFIRMATION LETTER FROM M/S PRASANDHI LEASING & FI NANCE CO. LTD. TO THE EFFECT THAT IT HAD PURCHASED SHARES OF THE ASSESSEE COMPANY FOR ` 3 LAKH. THE ASSESSING OFFICER, VIDE ORDER DATED 28.12.2007 PASS ED U/S 143(3) OF THE ACT, ACCEPTED THE INCOME RETURNED BY THE ASSESSEE. 2.1 IN THE IMPUGNED ORDER, THE LD. COMMISSIONER HAS OBSERVED, INTER ALIA, THAT SINCE THE INVESTIGATIONS MADE BY THE INVESTIGA TION WING OF THE ITA NO.863/DEL/2010 2 DEPARTMENT HAD INDICATED THAT PARSANDHI LEASING & F INANCE CO. LTD. IS A BOGUS COMPANY DEALING IN ACCOMMODATION ENTRIES AND THE TRANSACTION OF THIS COMPANY DESERVED TO BE INVESTIGATED, IT WAS NEEDED TO BE CONSIDERED WHETHER THE TRANSACTION AMOUNTED TO UNEXPLAINED CAS H CREDIT IN THE BOOKS OF THE ASSESSEE. THIS EXERCISE HAD NOT BEEN DONE BY T HE ASSESSING OFFICER. 2.2 THE RELIANCE BY THE ASSESSEE ON THE DECISION OF LOVELY EXPORTS LTD., 216 CTR 195(SC) AS PER THE LD. CIT WAS MISPLACED, S INCE THE POSITION OF LAW, AS ENUNCIATED THEREIN, WOULD HOLD GOOD ONLY IN IDENTICAL FACTUAL MATRICES, WHEREAS IN THE CASE OF THE ASSESSEE, NO E VIDENCE HAD COME ON RECORD TO ESTABLISH THE GENUINENESS AND CREDITWORTH INESS OF THE ALLEGED SHARE APPLICANT AND THIS ASPECT HAD NOT BEEN EXAMINED BY THE AO, NOR PROVED BY THE ASSESSEE; THAT THE INVESTIGATION CARRIED OUT BY THE INVESTIGATION WING OF THE DEPARTMENT LED TO DOUBTS INDICATING THAT THE SH ARE APPLICANT HAD INDULGED IN BOGUS SHARE APPLICATION TRANSACTIONS; AND IT WAS THE DUTY OF THE ASSESSING OFFICER TO HAVE CARRIED OUT THOROUGH INVESTIGATION INTO THE MATTER, WHICH HAD NOT BEEN DONE. 2.3 IT WOULD BE APPROPRIATE TO REPRODUCE HERE THE O BSERVATIONS OF THE LEARNED CIT:- 4.1 RELIANCE PLACED BY THE ASSESSEE ON THE CASE OF LOVELY EXPORTS LTD. AND OTHER CASES IS MISPLACED . THE POSITION OF LAW AS ENUNCIATED IN THE JUDGMENTS CITE D BY THE ASSESSEE WOULD HOLD GOOD ONLY IN IDENTICAL FACT UAL ITA NO.863/DEL/2010 3 MATRICES. THE FACTS OF THE ASSESSEES CASE ARE SUBSTANTIALLY DIFFERENT. IN THE ASSESSEES CASE, T HERE IS NO EVIDENCE ON RECORD TO ESTABLISH THAT THE GENUINENES S AND CREDITWORTHINESS OF THE ALLEGED SHARE APPLICANT HAS BEEN SUFFICIENTLY INVESTIGATED BY THE ASSESSING OFFICER AND PROVED BY THE ASSESSEE. THUS, THE REQUIREMENTS SET FORTH IN POINTS 6 & 7 OF THE DELHI HIGH COURTS JUDGMENT IN THE CASE OF LOVELY EXPORTS LTD. HAVE NOT BEEN COMPLIED WITH. 4.2 THE ASSESSEE HAS SUBMITTED COPY OF THE BANK STATEME NT OF THE SHARE APPLICANT PARSANDI LEASING & FINANCE LTD. OUT OF WHICH THE SHARE APPLICATION CHEQUE NO. 647955 DA TED 25.10.2004 ACCORDING TO THE ASSESSEE WAS CLEARED. FROM THIS STATEMENT, IT IS SEEN THAT THE SAID CHEQUE WAS CLEARED ON 28.10.2004. ON THIS DATE, ANOTHER CHEQUE NO. 64 7951 FOR RS. 5,00,000/- IS SHOWN TO HAVE BEEN CLEARED FI RST. SEQUENTIALLY ALSO, THIS CHEQUE NO. 647951 PRECEDES THE SHARE APPLICATION CHEQUE NO. 647955 AND THEREFORE, IT IS LOGICAL TO PRESUME THAT IT MUST HAVE BEEN ISSUED EA RLIER. IT IS OBSERVED THAT AS ON 28.10.2004, AFTER THE CHE QUE FOR RS.5 LAKHS STOOD CLEARED, THE BALANCE AVAILABLE WAS ONLY RS.9,875/-. THUS, THE SHARE APPLICANT DID NOT HAVE SUFFICIENT BALANCE IN ITS ACCOUNT TO ISSUE THE SHAR E APPLICATION CHEQUE FOR RS. 3 LAKHS. AS ON 25.10.20 04 ALSO, THE SHARE APPLICANT DID NOT HAVE SUFFICIENT B ALANCE. IT IS FURTHER OBSERVED FROM THE BANK STATEMENT THAT THERE IS A DEPOSIT OF RS. 3 LAKHS BY WAY OF CLEARING ON 28.10.2004 AND DEPOSIT OF CASH AMOUNTING TO RS. 5 L AKHS ON 29.10.2004. 4.2.1 GIVEN THE FACTS OF THE CASE AND DOUBTS INVOLVED IN VIEW OF INVESTIGATIONS BY THE INVESTIGATION WING INDICATING THAT THE SHARE APPLICANT HAS INDULGED IN BOGUS SHARE APPLICATION TRANSACTIONS, IT WAS THE DUTY OF THE AS SESSING OFFICER TO HAVE INVESTIGATED THOROUGHLY THE ABOVE TRANSACTIONS IN THE BANK STATEMENT AND GIVEN A FIND ING ABOUT HIS SATISFACTION OR OTHERWISE. THE RECORDS D O NOT INDICATE SUCH INVESTIGATION. THIS FINDING IS REINF ORCED BY THE ASSESSEES OWN SUBMISSION THAT IT HAD NOT BEEN PROVIDED THE COPY OF THE REPORT IN WHICH THE INVEST IGATION ITA NO.863/DEL/2010 4 WING HAS MENTIONED THAT THE SAID TRANSACTION WAS A BOGUS ONE AND OPPORTUNITY TO CROSS EXAMINE THE CONCERNED PERSON OF THE SAID COMPANY WAS NOT PROVID ED TO THE ASSESSEE COMPANY TO KNOW HOW HE IS SAYING TH AT THERE WAS ACCOMMODATION ENTRY IN THE ASSESSEES CAS E. 4.2.2 THUS, IT IS CLEAR THAT THE REQUIREMENTS SET FORTH I N POINTS 6 & 7 OF THE DELHI HIGH COURTS JUDGMENT IN THE CASE OF LOVELY EXPORTS LTD. HAVE NOT BEEN COMPLIED WITH. 4.3 IN VIEW OF THE ABOVE FINDINGS, I AM SATISFIED THAT THE ORDER U/S 143(3) DATED 28.12.2007 PASSED BY THE ITO WARD 2(3), NEW DELHI IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL T O THE INTERESTS OF THE REVENUE. ACCORDINGLY, THE SAID ASSESSMENT IS H EREBY CANCELLED AND THE ASSESSING OFFICER IS DIRECTED TO MAKE A FRESH ASSESSMENT. 3. CHALLENGING THE IMPUGNED ORDER, THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THE LD. CIT HAS ERRED IN INVOKING TH E PROVISIONS OF SECTION 263 OF THE I.T. ACT BY OBSERVING THAT THE ASSESSMEN T ORDER WAS ERRONEOUS IN SO FAR AS IT WAS PREJUDICIAL TO THE INTERESTS OF TH E REVENUE; THAT THE LD. CIT HAS FAILED TO APPRECIATE THAT THERE WAS NO MATERIAL TO SHOW THAT THE AO HAD COMMITTED ANY ERROR IN LAW SO AS TO VEST THE COMMIS SIONER WITH JURISDICTION U/S 263 OF THE ACT; THAT THE LD. CIT FAILED TO APPR ECIATE THAT THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE COMPANY FROM M/S PARASANDHI LEASING & FINANCE CO. LTD., REPRESENTED A CAPITAL R ECEIPT, NOT LIABLE TO BE ASSESSED AS INCOME IN THE HANDS OF THE ASSESSEE COM PANY; THAT THE LD. CIT ALSO FAILED TO APPRECIATE THAT THE TRANSACTION OF R ECEIPT OF SHARE APPLICATION MONEY FROM M/S PRASANDHI LEASING & FINANCE CO. LTD. WAS A GENUINE ITA NO.863/DEL/2010 5 TRANSACTION AND THERE WAS NO MATERIAL WHATSOEVER TO TAKE A CONTRARY VIEW; THAT THE LD. CIT HAS FURTHER ERRED IN HOLDING THAT THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS LTD. (SUPRA) IS NOT APPLICABLE; THAT THE LD. CIT HAS GONE WRONG IN OBSERVING THAT T HE ASSESSMENT ORDER WAS PASSED WITHOUT THE AO HAVING INVESTIGATED INTO THE MATTER; AND THAT THE LD. CIT HAS REMAINED OBLIVIOUS OF THE POSITION THAT THE AO HAD ISSUED A QUESTIONNAIRE TO THE ASSESSEE, ASKING SPECIFIC QUES TIONS ABOUT THE TRANSACTION INVOLVED AND THAT THE ASSESSEE HAD GIVEN A SPECIFIC REPLY TO SUCH QUESTIONNAIRE. ATTENTION IN THIS REGARD HAS BEEN D RAWN TO PAGES 12 TO 14 OF THE ASSESSEES PAPER BOOK. 4. THE LD. DR, ON THE OTHER HAND, HAS STRONGLY SUPP ORTED THE ORDER UNDER APPEAL. IT HAS BEEN PLEADED THAT THE INVESTIGATION CARRIED OUT BY THE INVESTIGATION WING OF THE DEPARTMENT INDICATED THE BOGUS TRANSACTION; THAT FURTHER, THE AO, DESPITE THIS INFORMATION FROM THE INVESTIGATION DEPARTMENT, NEVER CARRIED OUT ANY INVESTIGATION INTO THE MATTER ; AND THAT THE DECISION IN LOVELY EXPORTS (SUPRA), AS RIGHTLY HELD BY THE LD . CIT, IS NOT AT ALL APPLICABLE TO THE FACT SITUATION IN THE PRESENT CAS E, IN FACE OF THE FACT THAT THE AO FAILED TO CARRY OUT THE NECESSARY INVESTIGATION, RENDERING THE ASSESSMENT ORDER BOTH ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. ITA NO.863/DEL/2010 6 5. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE M ATERIAL ON RECORD. THE ASSESSMENT ORDER STATES THAT THE RETURNED INCOM E OF THE ASSESSEE WAS BEING ACCEPTED AFTER DISCUSSION. ASSESSEES PAPER B OOK 9 TO 13 IS A COPY OF THE QUESTIONNAIRE SERVED ON THE ASSESSEE BY THE AO. PAGE 12 PARA 19 READS AS FOLLOWS:- IF ANY SHARE APPLICATION MONEY IS RECEIVED DURING THE YEAR, YOU ARE REQUIRED TO FURNISH NAME, COMPLET E ADDRESS AND ASSESSMENT PARTICULARS OF PERSONS FROM WHOM THE SAME IS RECEIVED ALONG WITH COPIES OF CONFIRMATIONS FROM THESE PARTIES. 5.1 ASSESSEES PAPER BOOK PAGE 14 CONTAINS THE REQU ISITE DETAILS AS SUPPLIED BY THE ASSESSEE TO THE AO. IT READS AS FO LLOWS:- 1) CONFIRMATION REGARDING SHARE APPLICATION MONEY RECEIVED DURING THE YEAR ARE ENCLOSED HEREWIT H ALONG WITH BANK STATEMENT AND COY OF INCOME TAX RET URN IN RESPECT OF FOLLOWING SHARE APPLICANT:- 1) KAMLESH JAIN 2) GARIMA JAIN 3) RACHITA JAIN 4) PARSANDI LEASING & FINANCE PVT. LTD. IT IS SEEN THAT FIRSTLY, THE AO HAD ISSUED A SPECIF IC QUESTIONNAIRE, ASKING A POINTED QUESTION OF THE ASSESSEE WITH REGARD TO THE TRANSACTION OF THE SHARE APPLICATION MONEY WITH COMPLETE DETAILS OF PERSONS FROM WHOM THE SAME WAS RECEIVED. IN RESPONSE TO THIS, THE ASSESSEE DU LY SUPPLIED ALL THE PARTICULARS REQUIRED BY THE ASSESSEE. THAT HAVING BEEN DONE, UNDENIABLY, ITA NO.863/DEL/2010 7 LOVELY EXPORTS (SUPRA) TAKES OVER. THEREIN, THEI R LORDSHIPS OF THE HONBLE SUPREME COURT HAVE HELD THAT WHERE THE ASSESSEE HAS SUPPLIED THE REQUISITE DETAILS OF THE SHARE APPLICANTS, IT IS FOR THE DEPA RTMENT TO CARRY OUT NECESSARY INVESTIGATION IN THE CASES OF THOSE APPLICANTS AND THE AMOUNT CANNOT BE ADDED IN THE HANDS OF THE ASSESSEE, EVEN IF IT IS F OUND TO BE BOGUS. THAT BEING SO, THE LD. CIT HAS CLEARLY ERRED IN HOLDING THE CASE OF LOVELY EXPORTS(SUPRA) AS NOT BEING APPLICABLE. APROPOS TH E DEPARTMENTS CONTENTION THAT THE AO DID NOT CARRY OUT ANY INVEST IGATION, FROM THE ABOVE FACTS, IT IS CLEAR THAT AS REGARDS THE ASSESSEE, TH E ASSESSEE DULY DISCHARGED ITS ONUS AS REQUIRED U/S 68 OF THE ACT AND AS ADUMBRATE D UPON BY THE HONBLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS (SUPR A). IT WAS ONLY THEREAFTER, THAT THE RETURNED INCOME OF THE ASSESSE E WAS ACCEPTED BY THE AO. 5.2 IN VIEW OF THE ABOVE, LOOKED AT FROM ANY ANGLE WHATSOEVER, THE ASSESSMENT ORDER CAN NEITHER BE SAID TO BE ERRONEOU S, NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. THAT BEING SO, THE PROVIS IONS OF SECTION 263 OF THE ACT OUGHT NOT TO HAVE BEEN INVOKED BY THE LD. CIT. THE GRIEVANCE OF THE ASSESSEE IN THIS REGARD IS FOUND TO BE JUSTIFIED AN D IS ACCEPTED AS SUCH. THE ORDER OF THE LD. CIT PASSED U/S 263 IS CANCELLED AN D THAT PASSED BY THE AO IS REVIVED. ITA NO.863/DEL/2010 8 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 03.06.2011. SD/- SD/- (G.E. VEERABHADRAPPA) ( A.D. JAIN ) VICE PRESIDENT JUDICIAL MEMBER DT. 3RD JUNE 2011 GS COPY FORWARDED TO: 1. BAHUBALI RUBBER (P) LTD., NEW DELHI. 2. CIT, DELHI-I 3. CIT 5. DR BY ORDER DY. REGISTRAR