ACIT, New Delhi V. M/s. Divine India Infrastructure Pvt. Ltd., New Delhi

ITA 886/DEL/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0585 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 17-01-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 03-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MONA MOHANTY
• Keywords: Bogus Share capital; Accommodation entries
• Section: 207; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B NEW DELHI) BEFORE SHRI RAJPAL YADAV AND SHRI K.G. BANSAL I.T.A. NO.886/DEL/2010 ASSESSMENT YEAR: 2006-07 ASSISTANT CIT, VS. M/S. DIVINE INDIA INFRASTRUCT URE CIRCLE 10(1), PVT. LTD., B-8/17, SEC.18, ROHINI NEW DELHI. NEW DELHI. (PAN: AABCD9891N) (APPELLANT) (RESPONDENT) APPELLANT BY: MS. MONA MOHAN TY, SR.DR RESPONDENT BY: SHRI VIVEK GUPTA, CA ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORDE R OF LEARNED CIT(APPEALS) DATED 17.12.2009 PASSED FOR ASSESSMENT YEAR 2006-07. THE SOLITARY GRIEVANCE OF THE REVENUE IS THAT LEARNED C IT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF ` 12 LACS WHICH WAS ADDED BY THE ASSESSING OFFICER WITH THE AID OF SECTION 68 OF THE INCOME-TAX ACT, 1 961. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE COMPANY IS ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT. IT HAS FILED ITS RETURN OF INCOME ON 30 TH NOVEMBER 2006 AT ` 67,76,100. ASSESSING OFFICER SELECTED THE CASE FOR SCRUTINY ASSESSMENT AND ISSUED NOTICE UNDER SEC. 14 3(2) OF THE ACT ON 29 TH SEPTEMBER, 2007 WHICH WAS DULY SERVED UPON THE ASSE SSEE. DURING THE SCRUTINY OF ACCOUNTS, IT REVEALED TO THE ASSESSING OFFICER THAT ASSESSEE HAD 2 RECEIVED FRESH SHARE CAPITAL OF ` 24 LACS. HE DOUBTED THE GENUINENESS AND CREDITWORTHINESS OF THE TWO SHARE APPLICANTS, NAMEL Y, M/S. ATHNIC CREATION (P) LTD. AND M/S. MV MARKETING (P) LTD. ACCORDING T O THE ASSESSING OFFICER, BOTH THESE CONCERNS WERE ALLEGED TO BE OP ERATING FROM THE SAME ADDRESS I.E. WZ-134 PLOT NO.170 VISHNU GARDEN, NEW DELHI. BOTH THESE APPLICANTS HAVE GIVEN A SUM OF ` 6 LACS EACH. THE REASONS ASSIGNED BY THE ASSESSING OFFICER FOR DISBELIEVING THE SHARE APPLIC ATION RECEIVED BY THE ASSESSEE ARE THAT BOTH THE COMPANIES ARE OPERATING FROM THE SAME ADDRESS. PERUSAL OF THEIR BANK STATEMENT, IT REVEALS THAT CA SH WAS DEPOSITED BEFORE ISSUING CHEQUES IN FAVOUR OF THE ASSESSEE FOR ALLOT MENT OF SHARES. DIRECTOR OF INCOME-TAX (INV), GAVE A REPORT ALLEGING THAT THESE COMPANIES WERE INVOLVED IN PROVIDING ACCOMMODATION ENTRIES. WITH THE ABOVE CORROBORATIVE FACTORS, ASSESSING OFFICER ARRIVED AT A CONCLUSION THAT ASSE SSEE FAILED TO PROVE THE CREDITWORTHINESS OF THESE TWO COMPANIES AS WELL AS GENUINENESS OF THE TRANSACTIONS. 3. BEFORE THE LEARNED CIT(APPEALS), IT WAS ALLEGED BY THE ASSESSEE THAT ASSESSING OFFICER FAILED TO APPRECIATE THE TRUE CON TROVERSY. ASSESSING OFFICER OUGHT TO HAVE NOT MADE THE ADDITION ON ACCO UNT OF ALLEGED BOGUS SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE. A SSESSING OFFICER HIMSELF NOT DOUBTED THE IDENTITY OF THE SHARE APPLICANTS OF THE COMPANY. THE MOMENT 3 IDENTITY IS PROVED, ADDITION UNDER SEC. 68 CANNOT B E MADE IN THE CASE OF SHARE APPLICATION MONEY RECEIVED BY A COMPANY. APART FROM THIS ARGUMENT, IT WAS CONTENDED THAT ASSESSEE HAS FILED CONFIRMATION. THE IR PAN WITH THE INCOME- TAX DEPARTMENT. BOTH THESE COMPANIES ARE REGISTERED WITH THE REGISTRAR OF COMPANIES WITH THE ACTIVE STATUS. EVIDENCE TO THIS EFFECT WAS SUBMITTED BEFORE THE ASSESSING OFFICER. AFFIDAVITS OF THE DIR ECTORS, RESOLUTION OF THE COMPANIES EXHIBITING THE FACT THAT THEY WERE AUTHOR IZED TO APPLY FOR SHARES IN THE ASSESSEE COMPANY, COPY OF THE BANK STATEMENT IN THE CASE OF M/S. MV MARKETING (P) LTD. ETC. WERE FILED BEFORE THE ASSES SING OFFICER. LEARNED CIT(APPEALS) ARRIVED AT A CONCLUSION THAT ISSUE IN DISPUTE IS SQUARELY COVERED BY THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS REPORTED IN 216 CTR 195. LEARNED FIR ST APPELLATE AUTHORITY ALSO REFERRED A LARGE NUMBER OF DECISIONS RENDERED BY THE HON'BLE DELHI HIGH COURT I.E. (I) BHAV SHAKTI STEELS MINES (P) LT D. VS. CIT (2009) 18 DTR 194 (DELHI); (II) CIT VS. VALUE CAPITAL SERVICE S PVT. LTD. (2008) 221 CTR 511 (DELHI) AND (III) CIT VS. DIVINE LEASING AN D FINANCE LTD. (2007) 207 CTR 38 (DELHI). 4. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. LEARNED COUNSEL FOR THE ASSE SSEE SUBMITTED THAT ISSUE IN DISPUTE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HON'BLE DELHI 4 HIGH COURT RENDERED IN THE CASE OF VICTOR ELECTRODS LTD. ITA NO.586/2010 AND IN THE CASE OF DWARKADISH FINANCIAL SERVICES IT A NO.911/2010 IN BOTH THESE CASES HONBLE HIGH COURT HAS EXPOUNDED THE AP PROACH REQUIRED TO BE ADOPTED BY AUTHORITIES IN SUCH TYPE OF CASES. THESE OBSERVATIONS READ AS UNDER :- VICTOR ELECTRODES LTD . ITA NO.586/DEL/10: 9. THERE WAS NO LEGAL OBLIGATION ON THE ASSESSEE TO PRODUCE SOME DIRECTOR OR OTHER REPRESENTATIVE OF THE APPLIC ANT COMPANIES BEFORE THE ASSESSING OFFICER. THEREFORE, FAILURE OF ASSESSEE TO PRODUCE THEM COULD NOT, BY ITSELF, HAVE JUSTIFIED THE ADDITIONS MADE BY THE ASSESSING OFFICER, WHEN THE A SSESSEE HAD FURNISHED DOCUMENTS, ON THE BASIS OF WHICH, THE ASS ESSING OFFICER, IF HE SO WANTED COULD HAVE SUMMONED THEM F OR VERIFICATION. NO ATTEMPT WAS MADE BY THE ASSESSING OFFICER TO SUMMON THE DIRECTORS OF THE APPLICANT COMPANIES. TH E ADDRESSES OF THESE COMPANIES MUST BE AVAILABLE ON T HE SHARE APPLICATIONS, MEMORANDUM AND ARTICLES OF ASSOCIATIO N AND THEIR INCOME-TAX RETURNS. IF THE ASSESSING OFFICER HAD ANY DOUBT ABOUT IDENTITY OF THE SHARE APPLICANTS, HE CO ULD HAVE SUMMONED THE DIRECTORS OF THE APPLICANT COMPANIES. NO SUCH ATTEMPT WAS, HOWEVER, MADE BY HIM. THEREFORE, THE L EARNED CIT(APPEALS) AND THE INCOME-TAX APPELLATE TRIBUNAL, IN OUR VIEW WERE JUSTIFIED IN HOLDING THAT THE IDENTITY OF SHARE APPLICATIONS AND THE GENUINENESS OF THE TRANSACTION S HAD BEEN ESTABLISHED BY THE ASSESSEE. 5 ITA NO. 911/DEL/10 8. IN ANY MATTER, THE ONUS OF PROOF IS NOT A STATIC ONE. THOUGH IN SECTION 68 PROCEEDINGS, THE INITIAL BURDE N OF PROOF LIES ON THE ASSESSEE YET ONCE HE PROVES THE IDENTIT Y OF THE CREDITOR/SHARE APPLICANTS BY EITHER FURNISHING THEI R PAN NUMBER OR INCOME-TAX ASSESSMENT NUMBER AND SHOWS THE GENUI NENESS OF TRANSACTION BY SHOWING MONEY IN HIS BOOKS EITHER BY ACCOUNT PAYEE CHEQUE OR BY DRAFT OR BY ANY OTHER MODE, THEN THE ONUS OF PROOF WOULD SHIFT TO THE REVENUE. JUST BECAUSE THE CREDITORS/SHARE APPLICANTS COULD NOT BE FOUND AT TH E ADDRESS GIVEN, IT WOULD NOT GIVE THE REVENUE THE RIGHT TO I NVOKE SECTION 68. ONE MUST NOT LOSE SIGHT OF THE FACT THAT IT IS THE REVENUE WHICH HAS ALL THE POWER AND WHEREWITHAL TO TRACE AN Y PERSON. MOREOVER, IT IS SETTLED LAW THAT THE ASSESSEE NEED NOT TO PROVE THE SOURCE OF SOURCE. 5. IN THE LIGHT OF THESE OBSERVATIONS, IF WE EXAMI NE THE MATERIAL PLACED ON RECORD BY THE ASSESSEE AS WELL AS THE FIN DING OF LD. CIT(A) THEN IT WILL REVEAL THAT ASSESSEE HAS DISCHARGED IT S ONUS. THE AO HAS JUST MADE GENERAL OBSERVATION. WHATEVER MATERIAL HE WAS POSSESSING IT WAS SUFFICIENT TO START THE INVESTIGATION, BUT L D. AO INSTEAD OF COLLECTING CONCRETE MATERIAL TREATED THAT HALF BAKE D INFORMATION AS A CONCLUSIVE PROOF FOR DOUBTING THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE IN THIS YEAR. ASSESSING OFFICER HAS NOT CONFRONTED 6 THE ASSESSEE WITH THE MATERIAL COLLECTED BY THE DIR ECTOR OF INCOME-TAX (INV.) AND HOW THAT MATERIAL IS RELEVANT FOR THE CA SE OF THE ASSESSEE. IT APPEARS THAT HE HAS TREATED THE MATERIAL SUBMITTED BY THE DIRECTOR OF INCOME-TAX (INV) AS A GOSPEL TRUTH BECAUSE HE DID N OT INQUIRE ABOUT THE REST OF THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE. OUT OF `24 LACS, FRESH SHARE APPLICATION MONEY RECE IVED BY THE ASSESSEE IN THIS YEAR, HE HAS JUST MADE A DISCUSSIO N ABOUT `12 LACS WHICH IS BASED ON THE ALLEGED REPORT OF THE DIRECTO R OF INCOME-TAX (INV.). HE HAS JUST POINTED OUT CERTAIN CIRCUMSTANT IAL DEFECTS IN RESPECT OF THESE TWO COMPANIES, INSTEAD OF BRINGING OUT ANY CONCRETE MATERIAL FOR DOUBTING THE CLAIM OF THE ASSESSEE. LEARNED FIR ST APPELLATE AUTHORITY HAS APPRECIATED THE CONTROVERSY IN RIGHT PERSPECTIVE AND WE DO NOT SEE ANY REASON TO INTERFERE IN HIS ORDER. TH E APPEAL OF THE REVENUE IS DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. DECISION PRONO UNCED IN THE OPEN COURT ON 21.01.2011 ( K.G. BANSAL ) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 21/01/2011 MOHAN LAL 7 COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR