ACIT, New Delhi V. M/s. Bluebird Software Pvt. Ltd., New Delhi

ITA 967/DEL/2012

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2901 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 15-06-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 27-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Keywords: Rejection of books of accounts; Bogus Share capital; Unexplained investment; Income from undisclosed sources; Source of fund; Valuation report; Cancellation of registration
• Section: 153A; 133(6); 131; 68; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI A BENCH, NEW DELHI BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER, AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 967 /DEL/201 2 [A.Y. 20 08 - 09 ] THE A.C. I.T. VS. M/S BLUE BIRD SOFTWARE PVT. LTD CENTRAL CIRCLE - 22 2 A, AVENUE CASSIA WESTEND NEW DELHI GREENS, RAJOKARI NEW DELHI PAN : AA CCB 5605 P [APPELLANT] [RESPONDENT] DATE OF HEARING : 2 8 . 1 1 .2017 DATE OF PRONOUNCEMENT : 27 . 1 2 .2017 ASSESSEE BY : SHRI SALIL KAPOOR, ADV SHRI SANAT KAPOOR, ADV MS. SOUMYA SINGH, ADV REVENUE BY : SMT. APARNA KARAN - CIT [DR] ORD ER PER B.P. JAIN, ACCOUNTANT MEMBER, THIS APPEAL OF THE REVENUE ARISES F ROM THE ORDER OF THE LD. CIT(A) - III , N EW DELHI VIDE ORDER DATED 1 4 . 1 2 .201 1 FOR A.Y. 20 08 - 09 . 2 ITA NO. 96 7/DEL/201 2 2. THE REVENUE HAS RAISED THE FOLLOWING EFFECTIVE GROUND S OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 1,00,00,000/ - MADE BY THE ASSESSING OFFICER U/S 68 ON ACCOUNT OF BOGUS SHARE APPLICATION MONEY /SHARE PREMIUM RECEIVED BY THE ASSESSEE COMPANY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 2,34,57,000/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED INVESTMENT ON THE BASIS OF DIFFER ENCE FOUND IN THE BALANCE SHEET FILED BY THE ASSESSEE BEFORE THE BANK AUTHORITY. 6. TH E ORDER OF THE LD. CIT (A) SO ERRONEOUS IN LAW AND IS NOT TENABLE ON FACTS AND LAW . GROUND NO. 1 3. BRIEFLY STATED, THE FACTS OF THE CASE AS EMANATING FR OM THE ORDERS OF THE AUTHORITIES BELOW ARE THAT THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008 - 09 ON 24.6.2009. THAT A SEARCH ACTION WAS CARRIED OUT BY THE DEPARTMENT ON 6.11.2008 AND THE NOTICE U/S 153A OF THE INCOME - TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT' FOR SHORT] WAS ISSUED TO THE RESPONDENT COMPANY ON 3 ITA NO. 96 7/DEL/201 2 30.10.2009. IN RESPONSE TO THIS NOTICE, THE ASSESSEE COMPANY FURNISHED ITS RETURN OF INCOME U/S 153A OF THE ACT ON 27.11.2009 DECLARING INCOME AT NIL. THE ASSESS MENT PROCEEDINGS WERE INITIATED BY ISSUING NOTICE U/S 143(2) OF THE ACT ON 9.2.2010. A DETAILED QUESTIONNAIRE WAS ISSUED ON 21.5.2010. THE RESPONDENT COMPANY HAD FURTHER INCREASED THE SHARE CAPITAL DURING THE ASSESSMENT YEAR. IT IS STATED IN THE ASSESSMENT ORDER THAT DETAILS WERE CALLED FOR IN RESPECT OF THE PERSONS WHO HAVE APPLIED FOR THE SHARE CAPITAL AND MODE OF RECEIPT OF THE CAPITAL MONEY. THE ASSESSEE HAD FILED CONFIRMATION, COPY OF INCOME TAX RETURNS, SHARE APPLICATION FORMS AND BANK STATEMENTS IN R ESPECT OF FRESH SHARE CAPITAL. THE AO REFERRED TO THE REPORT OF THE ADDL. DI R ECTOR OF INCOME TAX (INV.), KOLKATA WHICH IS IN CONTINUATION OF HIS LETTER DATED 27.2.2009 HAS SUBMITTED ITS REPORT, IT IS FOUND THAT THE COMPANIES ARE NOT EXISTING IN THE GIVEN ADDRESS AND AS SUCH NOTICE U/S 131 COULD NOT BE SERVED TO THEM AS THOSE ARE BEING EVADED. IN PARA 10 OF THE ASSESSMENT ORDER REPRODUCED THE FINDINGS OF ADI (INV.) UNIT KOLKATA LETTER DATED 15.5.2009. IT IS FURTHER STATED THAT POST SEARCH ENQUIRIES THE ADDL DIT (INV.) - IV VIDE HIS LETTER DATED 3.9.2009 WRITTEN TO REGISTRAR OF COMPANIES, DELHI AND KOLKATA FOR CANCELLATION OF REGISTRATION OF COMPANIES AND REPRODUCES SUCH LETTER ON PAGE 6 - 11 OF THE ASSESSMENT ORDER. 4 ITA NO. 96 7/DEL/201 2 4. THE SHOW - CAUSE NOTICE AT PARA 15 PAGES 11 AND 12 OF THE ASSESSMENT ORDER IS REPRODUCED , AS BELOW : PLEASE REFER TO PAGE NO. 11 TO 13 OF ANNEXURE A - 3/ PARTY G - 2. ASSESSEE COMPANY FOUND AND SEIZED. ON PERUSAL OF THESE PAPERS IT IS FOUND THAT IN THE YEAR UNDER CONSIDERATION THE ASSESSEE COMPANY HA S FLOATED THE SHARES WORTH RS. 270 LAKH FOR OTHER THAN ORIGINAL SUBSCRIBER (FAMILY MEMBERS) ON THE PREMIUM OF RS. 90 PER SHARE. IN THIS RESPECT, YOU WERE ASKED TO PROVE THE IDENTITY OF PERSON, CREDIT WORTHINESS OF SUBSCRIBER OF SHARES AND GENUINENESS OF TRANSACTION. YOU WERE GIVEN SEVERAL OPPORTUNITIES VIDE THIS OFFICE LETTERS DATED 16/07/2010 & 07 - 10 - 2010 TO PRODUCE THE PERSON CONCERNED BUT YOU HAVE FAILED TO PRODUCE ANY OF THE SUBSCRIBER/ PERSON TO PROVE THE IDENTITY OF PERSON, CREDIT WORTHINESS OF SUBS CRIBER OF SHARES AND GENUINENESS OF TRANSACTION. IN VIEW OF THE SAID FACTS YOU ARE REQUESTED TO EXPLAIN AS TO WHY IT SHOULD NOT BE TREATED AS NON EXITING BOGUS PAPER COMPANY COMPANIES AND WHY IT SHOULD NOT BE PRESUMED THAT IT IS THE OWN MONEY OF THE ASSES SEE COMPANY ROUTED THROUGH ABOVE MENTIONED CONCERNS AND EXPLAIN AS TO WHY ENTIRE AMOUNT OF RS. 2,70,00,000/ - WHICH INCLUDE SHARE PREMIUM ALSO SHOULD NOT BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE COMPANY. 5 ITA NO. 96 7/DEL/201 2 5. THE ASSESSING OFFICER FURTHER OBSERVED IN T HE ASSESSMENT ORDER THAT RESPONSE WAS RECEIVED FROM THE ASSESSEE COMPANY WHICH IS REPRODUCED IN THE ORDER AT PAGE 12 - 14 OF THE ASSESSMENT ORDER. THE AO ASKED THE ASSESSEE TO PRODUCE THIS PERSON WHO HAD INVESTED FOR EXAMINATION BUT ASSESSEE FAILED, AND ADDE D A SUM OF RS. 1,00,00,000/ - TO THE RETURNED INCOME OF THE APPELLANT UNDER SECTION 68 OF THE ACT. 6. BEING DISSATISFIED WITH THE IMPUGNED ADDITION, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND VEH EMENTLY CONTENDED IN RESPECT OF ADDITION OF RS1,00,00,000/ - AS FOLLOWS : (I) THE AO IS BIASED WITH THE REPORT OF KOLKATA WING WHICH WAS NEVER CONFRONTED TO THE APPELLANT COMPANY, (II) ALL REQUISITE DOCUMENTS TO PROVE THE CREDIBILITY OF THE INVESTOR, INC LUDING PAN, AUDITED FINANCIAL STATEMENT, SHARE APPLICATION MONEY, BANK ACCOUNT OF INVESTOR COMPANY, AMONGST OTHERS WERE FILED AS EVIDENT FROM REPLY DATED 4.12.2010 TO THE SHOW - CAUSE NOTICE DATED 24.11.2010, 6 ITA NO. 96 7/DEL/201 2 (III) THERE WAS NO REVENUE OF THE A SSESSEE AS T HERE WAS NO SALE AND IT WAS DUE THE FACT THAT THE ASSESSEE COMPANY HAD YET TO EARN REVENUE AS THE IT / ITES BUILDING WAS UNDER CONSTRUCTION. 7. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, LD. CIT(A) DELETED THE ADDITION VIDE PARA 4.2 OF ITS ORDE R BY HOLDING THAT NO INCRIMINATING DOCUMENT WAS FOUND DURING THE COURSE OF SEARCH WHICH SHOW S THAT THE AMOUNT INVESTED BY SHAREHOLDER COMPANY IN THE ASSESSEE COMPANY DO NOT BELONG TO THE SHAREHOLDER BUT IS THE UNACCOUNTED INCOME OF THE ASSESSEE COMPANY WHI CH HAS BEEN PLOUGHED BACK IN THE ASSESSEE COMPANY IN THE FORM OF SHARE CAPITAL. THE LD CIT ( A ) FURTHER HELD THAT THE ASSESSEE COMPANY HAS DISCHARGED ITS ONUS BY FILING THE REQUISITE DETAILS INCLUDING THE BANK STATEMENT, BALANCE SHEET ETC. OF THE SHAREHOLDER COMPANY. 8. THE LD . DR ARGUED THAT THE ORDER OF THE CIT (APPEALS) IS NOT CORRECT AND RELIED UPON THE ORDER OF THE ASSESSING OFFICER. SHE POINTED OUT THAT THE ASSESSEE MIGHT HAVE FURNISHED CERTAIN DOCUMENTARY EVIDENCES BUT THE SAME WERE NOT PROVED BY IT DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS EVIDENT FROM THE REPORT OF ADIT KOLKATA. IT IS FURTHER CONTENDED BY THE LEARNED DR THAT THE CIT (APPEALS) FAILED TO 7 ITA NO. 96 7/DEL/201 2 TAKE INTO CONSIDERATION REPORT OF ADIT KOLKATA. THE LD. DR HAS RELIED ON THE FOLLOWING JUD GMENTS: 1 . N.TARIKA PROPERTIES INVESTMENT (P) LTD V/S CIT 51 TAXMANN.COM 387 (SC) 2 . CIT VS NOVA PROMOTORS & FINLEASE (P) LTD 18 TAXMANN.COM 217 (DELHI) 3 . CIT VS NIPUN BUILDERS & DEVELOPERS (P) LTD 30 TAXMANN.COM 292 (DELHI) 4 . CIT VS NAVODAYA CASTLE PVT LTD 50 T AXMANN.COM 110 (DELHI) 9. ON THE OTHER HAND , THE LD. C OUNSEL FOR THE ASSESSEE COMPANY REFERRED TO THE ASSESSMENT ORDER AND STATED THAT THE ASSESSMENT ORDER HAS BEEN PASSED IN MECHANICAL MANNER. OUR ATTENTION WAS DRAWN TO PARA 2 OF THE ORDER WHERE IT IS S TATED THAT THE NOTICE U/S 153A WAS ISSUED ON 30.10.2009, RETURN WAS FILED BY THE ASSESSEE COMPANY ON 27.11.2009, NOTICE U/S 143(2) WAS ISSUED ON 9.2.2010. IT WAS FURTHER CONTENDED THAT THE REPORT OF ADIT KOLKATA HAS BEEN REFERRED IN PARA 9 AND 10 WHICH ARE DATED 27.2.2009 AND 15.5.2009. BOTH THESE REPORTS DO NOT RELATE TO THE ASSESSMENT PROCEEDINGS AS THESE ARE OF A DATE WHICH IS EVEN PRIOR TO THE ISSUANCE OF NOTICE U/S 153A OF THE ACT. HENCE, NO ENQUIRY WAS CONDUCTED BY THE AO DURING THE ASSESSMENT 8 ITA NO. 96 7/DEL/201 2 PROCEE DINGS IN THIS REGARD AND THIS GENERAL REPORT CANNOT BE OF ANY HELP. HE ALSO SUBMITTED THAT THIS REPORT WAS NEVER CONFRONTED TO THE ASSESSEE. HE FURTHER STATED THAT EVIDENCE FILED BY THE ASSESSEE ON 4.12.2010 IN THE SHAPE OF CONFIRMATION, INCOME TAX RETURNS BANK STATEMENTS HAVE BEEN IGNORED AS NO ENQUIRY HAS BEEN MADE BY THE AO AFTER THAT. FURTHER, OUR ATTENTION WAS DRAWN TO PARA 13 OF THE ORDER WHERE THE AO HAS DISCUSSED THAT THEY SENT A REPORT TO ROC AND CLB FOR CANCEL THE REGISTRATION OF THESE COMPANIES. THE COUNSEL OF THE ASSESSEE COMPANY SUBMITTED THE COPY OF MASTER DATA DRAWN FROM MINISTRY OF CORPORATE AFFAIRS WEBSITE ON 6.9.2017 WHICH SHOWS THAT THIS SHAREHOLDER COMPANY HAS CREATED CHARGE ON ITS ASSETS ON 3.6.2015 AND THE FILING OF AUDITED FINANCIAL ST ATEMENT WITH ROC SHOWS THAT THE STATUS OF THE COMPANY IS ACTIVE. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THERE IS NO REVENUE OR INCOME OF THE RESPONDENT COMPANY AS SALE HAD NOT STARTED YET. THE PROPERTY IS UNDER CONSTRUCTION AND THE SAME IS STANDING THE BALANCE SHEET AS FIXED ASSET. NO DOUBT THAT VALUE OF PROPERTY IS VERY HIGH BUT THERE IS NO REVENUE IN THE HANDS OF THE COMPANY AND THE ALLEGATION OF THE AO THAT ASSESSEE HAS USED ITS OWN INCOME IN THE FORM OF THIS SHARE CAPITAL IS BASELESS AS THERE IS NO INCOME. EVEN THE PREOPERATIVE EXPENSES ARE STANDING IN THE 9 ITA NO. 96 7/DEL/201 2 BALANCE SHEET. HE RELIED ON THE FOLLOWING DECISION S IN SUPPORT OF HIS CONTENTIONS: 1 . CIT VS VALUE CAPITAL SERVICES (P) LTD 307 ITR 333 (DELHI) 2 . CIT VS GANGESHWARI METAL PVT LTD 10 TAX MANN.COM 137 (DELHI) 3 . VICTORIA FOODS (P) LTD VS DCIT 3 ITR (T) 35 (DELHI) 4 . CIT VS LOVELY EXPORTS (P) LTD 216 CTR 195 (SC) 10. HE ALSO CONTENDED THAT THE WORD USED IN SECTION 68 IS MAY WHICH MEAN S THAT AO HAS THE DISCRETION MAKE ADDITION OR NOT EVEN IF T HE AMOUNT IS FOUND TO BE CREDITED IN THE BOOKS OF ACCOUNT. HE RELIED ON THE DECISION OF P.K. NOOR J AHAN 237 ITR 571 (SC) TO SUBMIT THAT IN THE FACTS OF THIS CASE NO ADDITIONS SHOULD HAVE BEEN MADE BY THE AO AS THERE IS NO INCOME IN THE HANDS OF ASSESSEE AN D IT IS INCORRECT TO SAY THAT IT HAS USED ITS OWN UNDISCLOSED INCOME IN THE SHAPE OF SHARE CAPITAL. 11. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE A.O AND THE LD. CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS RELIED UPON BY BOTH THE SIDES. IT IS NOTED FROM THE RECORDS 10 ITA NO. 96 7/DEL/201 2 THAT THE ASSESSEE HAD SUBMITTED ALL THE DOCUMENTARY EVIDENCES TO ASCERTAIN THE CREDIBILITY OF THE SHAREHOLDER COMPANY AND NONE OF THES E DOCUMENTS ARE ASSAILED BY THE LEARNED AO BY FURTHER INVESTIGATION OR ENQUIRY. THE REPORT OF ADIT AS REFERRED BY THE AO IS MUCH BEFORE THE EVIDENCES FILED BY THE ASSESSEE. THE AO HAS NOT MADE ANY ENQUIRY AFTER THE EVIDENCES ARE FILED BY THE ASSESSEE. THE CIT (A) HAS NOTED THAT THE FOLLOWING DOCUMENTS HAVE BEEN FILED BY THE ASSESSEE : A . COPY OF SHARE APPLICATION FORM B . CONFIRMATION OF SHARE CAPITAL CONTRIBUTION FROM THE INVESTOR COMPANY, GIVING DETAILS OF THE CHQ NO AND BANK ACCOUNT THROUGH WHICH THE SHARE APPLI CATION IS MADE C . PAN DETAILS OF INVESTOR COMPANY D . COPY OF INCOME TAX RETURN OF INVESTOR COMPANY E . COPY OF BANK STATEMENT OF INVESTOR COMPANY F . COPY OF FORM NO 2 FILED ON 1.7.2008 TOGETHER WITH LIST OF SHAREHOLDER TO WHOM SHARES WERE ALLOTTED G . COPY OF ANNUAL REPORT FILED WITH ROC FOR FY 2007 - 08 EVIDENCING THE FACT THAT NAME OF SHARE HOLDER IS APPEARING THE LIST OF SHARE HOLDERS 11 ITA NO. 96 7/DEL/201 2 H . THE PRESENT ACTIVE STATUS OF THE INVESTOR COMPANY FROM THE WEBSITE 12. FURTHER, THE MASTER DATA OF ROC SHOWS THAT THE COMPANY IS AN EXIST ING COMPANY AND HAS FILED ITS AUDITED FINANCIAL STATEMENT UNTIL F . Y . 2015 - 16. THE REPORT RECEIVED FROM KOLKATA WAS NEVER CONFRONTED TO THE ASSESSEE. THERE IS ANOTHER IMPORTANT FACT IN THIS CASE THAT THE ASSESSEE HAS NOT GENERATED ANY REVENUE AS IT IS STIL L CONSTRUCTING THE BUILDING WHICH IS STANDING IN THE BALANCE SHEET. THE ASSET MAY HAVE HIGH VALUE BUT FINDING OF THE AO THAT ASSESSE E HAS USED ITS OWN UNDISCLOSED INCOME TO SHOW IT AS SHARE CAPITAL CANNOT BE UPHELD. AS HELD BY THE HONBLE JURISDICTIONAL HI GH COURT IN THE CASE OF CIT VS VALUE CAPITAL (SUPRA) IT IS FOR THE REVENUE TO PROVE THAT INVESTMENT MADE IN THE SHARES ACTUALLY EMANATED FROM THE COFFERS OF THE ASSESSEE. IN VIEW OF THE FACTS OF THIS CASE THE CASE LAW S RELIED UPON BY THE REVENUE WILL NOT S UPPORT IT S CASE . IN THESE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHICH DOES NOT CALL FOR ANY INTERFERENCE AT OUR END . THEREFORE, THE ORDER OF THE CIT (A) IS UPHELD ON THIS GROUND OF APPEAL RAISED BY THE REVENUE WHICH STANDS DISMISSED. GROUND NO. 1 RAISED BY THE REVENUE STANDS DISMISSED. 12 ITA NO. 96 7/DEL/201 2 GROUND OF APPEAL NO. 2 : 13. THE CASE OF THE AO FROM PARA 41 ONWARDS OF THE ASSESSMENT ORDER IS THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS IT IS NOTICED THAT THE ASSESSEE COMPANY HAS OBTAINED SECURED LOAN FROM ORIENTAL BANK O F COMMERCE (OBC) TO THE TUNE OF RS. 25 CRORES. IN THIS RESPECT ENQUIRIES HAVE BEEN CONDUCTED FROM BANK AND DETAILS HAVE BEEN CALLED FOR U/S 133(6) OF THE I.T. ACT. IN RESPONSE TO THE NOTICE U/S 133(6), ORIENTAL BANK OF COMMERCE VIDE ITS LETTER DATED 29.11.2010 SUBMITTED THAT - WE HAVE TO INFORM THAT NO VALUATION REPORT OF THE PROPERTY MORTGAGED IN THE SUBJECT AMOUNT IS AVAILABLE AT THE BRANCH RECORDS AS WE UNDERSTAND THAT NO SUCH VALUATION REPO RT WAS CALLED BY THE BANK FROM THE PROPERTY BECAUSE AT THE TIME OF SANCTION OF LOAN, THE ACTUAL VALUE OF LAND MORTGAGED WAS CONSIDERED AS PART OF THE PROJECT COST. HOWEVER WE ARE ENCLOSING HEREWITH CA CERTIFICATE DATED 19.07.2007, 16.08.2007, 05.10.2007 AN D 31.12.2007 SUBMITTED BY THE COMPANY SHOWING THE SOURCE AND UTILIZATION OF FUNDS TOWARDS CONSTRUCTION OF PROPOSED I.T. PARK. 13 ITA NO. 96 7/DEL/201 2 14. THE BALANCE SHEET FILED BY THE ASSESSEE SHOWS TOTAL OF RS. 27.55 CRORES. THE ASSESSING OFFICER, THEREFORE , ASKED THE ASSESSE E TO FURNISH BALANCE SHEET AS AT 31.12.2007 AS PER REGULAR BOOKS OF ACCOUNTS I.E. AS ON THE DATE OF THE BALANCE SHEET (THE DATE OF CA CERTIFICATE) SUBMITTED BY THE ASSESSEE TO THE BANK. THE AO IN PARA 43 OF THE ASSESSMENT ORDER OBSERVED THAT THE BALANCE SH EET WITH THE BANK DUTY CERTIFIED BY THE CA WHEN COMPARED WITH THE BALANCE SHEET ON THE SAME DAY AS PER REGULAR BOOKS OF ACCOUNTS SHOWS THAT THE TOTAL OF THE ASSETS SIDE OF THE BALANCE SHEET FILED WITH THE BANK IS RS. 234.57 LACS (RS. 2755.46 LACS RS. 252 0.89 LACS) MORE THAN THE SAME AS PER REGULAR BOOKS OF ACCOUNTS. ACCORDINGLY, A SHOW CAUSE NOTICE WAS ISSUED BY THE AO ON 26.11.2010 , WHICH READS AS UNDER: - BALANCE SHEET AS ON 31.12.07 AS FURNISHED WHICH IS AS PER BOOKS OF ACCOUNTS AND COPY OF BALANCE SH EET FILED BEFORE ORIENTAL BANK OF COMMERCE, IFB BRANCH, H - 15, CONNAUGHT CIRCUS, NEW DELHI WHICH IS CERTIFIED BY THE CHARTERED ACCOUNTANT SH. AJAY GUPTA, IT IS OBSERVED THAT, TOTAL OF ASSETS SIDE IS SHOWN AT RS. 2755.46 LACS WHEREAS BALANCE SHEET FILED BY T HE ASSESSEE COMPANY BEFORE THE BANKING AUTHORITY IS SHOWN AT RS. 2520.89 LACS. THUS THERE IS DIFFERENCE OF RS.234.57 LACS IN BALANCE SHEET I.E. 234.57 IS EXCESS AMOUNT SHOWN IN BALANCE SHEET FILED BY THE 14 ITA NO. 96 7/DEL/201 2 ASSESSEE COMPANY BEFORE BANKING AUTHORITY WHICH IS ON 31.12.07. (COPY OF CERTIFIED BALANCE SHEETS ARE ENCLOSED.) IN THIS RESPECT, YOU ARE HEREBY REQUESTED TO EXPLAIN THE DIFFERENCE I.E. EXCESS AMOUNT OF RS.234.57 LACS. IN ABSENCE OF SATISFACTORILY REPLY AN ADVERSE VIEW SHALL BE TAKEN IN CASE OF ASSESSEE C OMPANY. 15. IN RESPONSE TO THE SHOW CAUSE NOTICE THE ASSESSE E COMPANY IN T ER - ALIA SUBMITTED THAT THE CA CERTIFICATE HAS BEEN PREPARED AS ON 31.12.2007, WHICH IS NOT THE YEAR END DATE. A LOT OF RECTIFICATION ENTRIES ARE MADE OR PROVISIONS ARE CRATED AT THE TIME OF FINALIZATION OF BALANCE SHEET AFTER AUDIT BY THE AUDITORS. THE AO ADDED THE SAME TO THE RETU R NED INCOME OF ASSESSEE. BEING AGGRIEVED , THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) AND MADE THE FOLLOWING SUBMISSIONS QUA AD DITION OF RS. 234.57 LAKHS: (I) AO HAS REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE COMPANY U/S 145 OF THE ACT WITHOUT PROVIDING ANY OPPORTUNITY OR ISSUING SHOW - CAUSE NOTICE ABOUT HIS INTENTION TO REJECT THE BOOKS OF ACCOUNTS 15 ITA NO. 96 7/DEL/201 2 (II) NO SINGLE DOCUMENT IS FOUND AND CONFRONTED BY THE AO TO THE ASSESSEE WHICH SHOWS THAT THE AMOUNT ACTUALLY INVESTED BY THE ASSESSEE THAT QUALIFIES FOR ADDITION U/S 69, (III) THE AO DID NOT VERIFY THE FACT ABOUT EXTRA INVESTMENT FROM THE BOOKS OF ACCOUNTS THAT WAS AVAILABLE AS SIZED MATERIAL, (IV) DID NOT POINT OUT ANY MISTAKE IN AUDITED FINANCIAL STATEMENT DULY SIGNED BY THE STATUTORY AUDITORS, (V) CA CERTIFICATE WAS NOT FOUND FROM THE ASSESSEE COMPANY DURING SEARCH, THEREFORE, IT IS NOT A SEIZED MATERIAL AND NO ADVERSE PRESUMPTIO N CAN BE DRAWN U/S 292C OF THE ACT, AMONGST OTHERS. 16. AFTER CONSIDERING THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE, T HE LD. CIT(A) CAME TO THE CONCLUSION THAT THE AUDITED FINANCIAL STATEMENTS OF THE ASSESSEE COMPANY FOR THE YEAR UNDER CONSIDER ATION WERE AUDITED BY RAJESH GUPTA & ASSOCIATES CHARTERED ACCOUNTANT AND WHEREAS THE CERTIFICATE FOR THE PURPOSE OF BANK LOAN WAS ISSUED BY SOME AJAY K GUPTA & COMPANY, CHARTERED ACCOUNTANT. THE IMPUGNED ORDER FURTHER STATE THAT CA CERTIFICATE IPSO FACTO C ANNOT PROVE THE EXISTENCE OF UNACCOUNTED INVESTMENT BY THE APPELLANT 16 ITA NO. 96 7/DEL/201 2 COMPANY. THE ASSESSEE COMPANY PROVIDED A COMPARATIVE STATEMENT IN FIRST APPELLATE PROCEEDINGS BY WHICH IT WAS NOTED BY THE CIT(A) THAT A DIFFERENCE OF RS. 234.57 LACS IN SOURCE OF FUNDS A ND THERE IS CORRESPONDING INCREASE IN UTILIZATION OF FUNDS SHOWN IN CA CERTIFICATE. THE CIT(A) AFTER DISCUSSING THE SAME IN DETAIL, DELETED THE IMPUGNED ADDITION OF RS. 234.57 LACS. 17. THE LD. DR SUBMITTED THAT THE ORDER OF THE LD. CIT(A) IS NOT CORRECT AND RELIED UPON THE ORDER OF THE ASSESSING OFFICER. SHE POINTED OUT THAT THE ASSESSEE FAILED TO EXPLAIN THE DIFFERENCE OF RS. 234.57 LACS AND RELIED ON PARA 47 OF THE ORDER THAT THE ACTUAL BALANCE SHOWING ASSETS OF RS. 27.55 CRORE TO THE BANK AND ALSO SEC URED LOAN ON THE STRENGTH OF THE SAME. SHE CONTENDED THAT THE CA CERTIFICATE IS A BASIC DOCUMENT AND GOES TO THE ROOT OF THE MATTER AND JUSTIFIES THE ADDITION MADE BY THE ASSESSING OFFICER. 18. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE INVITED OUR ATT ENTION TO PAGE 114 OF PAPER BOOK WHICH IS A COMPARATIVE STATEMENT OF FIGURES IN AUDITED FINANCIAL STATEMENT DULY SIGNED BY THE STATUTORY AUDITORS WHICH WERE BEFORE AO AND CA CERTIFICATE ISSUED BY DIFFERENT CHARTERED ACCOUNTANT AND CLEARLY SHOWS THAT THERE IS A DIFFERENCE IN SOURCE OF 17 ITA NO. 96 7/DEL/201 2 FUNDS AND APPLICATION OF FUNDS I.E. RS. 234.57 LACS. HE STATED THAT THE LEARNED DR DID NOT POINT OUT ANY DISCREPANCY IN THAT STATEMENT. HE FURTHER STATED THAT THERE IS NO EVIDENCE OF ANY INVESTMENT MADE BY THE ASSESSEE EXCEPT W HAT IS DEBITED IN THE BOOKS OF ACCOUNT. HE ALSO STATED THAT NO ADDITION CAN BE MADE ON THE BASIS OF CA CERTIFICATE WHEN THERE IS NO INVESTMENT MADE BY THE ASSESSEE OUTSIDE BOOKS OF ACCOUNT. HE ALSO SUBMITTED THAT BOOKS OF ACCOUNT HAVE BEEN WRONGLY REJECTED BY THE AO WITHOUT POINTING ANY MISTAKE IN THE BOOKS AND ALSO WITHOU T GIVING ANY NOTICE TO THE ASSE SSEE. HE SUBMITTED THAT D U RING SEARCH ALSO NO MATERIAL IS FOUND WHICH SHOWS ANY UNACCOUNTED INVESTMENT IS MADE BY THE ASSESSEE. HE ALSO RELIED ON CIT VS N. S WAMY 125 TAXMAN 233 (MADRAS). 19. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD . IT IS NOTED FROM THE RECORDS THAT THE ASSESSEE HAD SUBMITTED THE AUDITED FINANCIAL STATEMENT TO THE AO WHICH WERE ALSO FILED WITH THE REGISTRAR OF COMPANIES. IN ABSENCE OF ANY COGENT OR MATERIAL EVIDENCE ON RECORD IN RESPECT OF ALLEGED UNACCOUNTED INVESTMENT DURING THE YEAR UNDER CONSIDERATION EITHER BY WAY OF SOME INCRIMINATING MATERIAL FOUND DU RING THE COURSE OF SEARCH OR OTHERWISE, WE ARE OF THE VIEW THAT NO 18 ITA NO. 96 7/DEL/201 2 ADDITION CAN BE MADE ONLY ON THE BASIS OF CA CERTIFICATES. THE AO HAS NOT STATED ANYTHING QUA SOURCE OF FUNDS IN AUDITED FINANCIAL STATEMENT. ON THE CONTRARY THE AO HAS ADMITTED THE AUDITED FINANCIAL STATEMENTS OF THE ASSESSEE COMPANY TREATING THE INCREASE OF SHARE CAPITAL TO THE EXTENT OF RS. 1,00,00,000/ - AND HAS NOT DISCUSSED THE DIFFERENCE AS SHOWN IN COMPARATIVE STATEMENT. THE AO HAS REJECTED THE BOOKS OF ACCOUNT WITHOUT POINTING ANY M ISTAKE IN IT. ADMITTEDLY NO NOTICE WAS GIVEN TO THE ASSESSEE BEFORE REJECTING THE BOOKS OF ACCOUNT. NO EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE AO THAT ANY UNDISCLOSED INVESTMENT HAS BEEN MADE BY THE ASSESSEE. IN THESE CIRCUMSTANCES WE ARE OF THE OPINION THAT THE AO HAS MADE THIS ADDITION WITHOUT BRINGING ANY EVIDENCE ON RECORD THAT ANY UNDISCLOSED INVESTMENT HAS BEEN MADE BY ASSESSEE. THE SAID CA CERTIFICATE CANNOT BE THE ONLY BASIS, IT MAY BE A BASIS TO PROBE FURTHER BUT IT ALONE CA N NOT BE BASIS FOR ADD ITION. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND IT DOES NOT CALL FOR ANY INTERFERENCE. THEREFORE, THE ORDER OF THE CIT ( A) IS UPHELD AND THIS GROUND OF APPEAL RAISED BY THE REVENUE STANDS DISMISSED. ACCORDINGLY, GROUND NO. 2 IS DISMISSED . 19 ITA NO. 96 7/DEL/201 2 20 . IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO. 96 7 /DEL/201 2 IS DISMISSED . THE ORDER IS PRO NOUNCED IN THE OPEN COURT ON 27 . 1 2 .2017. SD/ - SD/ - [ SUDHANSHU SRIVASTAVA] [B.P. JAIN] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 27 TH DECEMBER , 2017 VL/ COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR ITAT, NEW DELHI ASST. REGISTRAR,