ITO, WARD- 27(3), NEW DELHI V. WONDER MOLD PLAST PVT. , NEW DELHI

ITA 6149/DEL/2017

AI Insights

The case involves the Income Tax Department (Revenue) appealing against the order of the Commissioner of Income-tax (Appeals) which had deleted the additions made under section 68 of the Income Tax Act, 1961. The additions pertained to unexplained credits in the form of share application money received by M/s. Nova Formworks Private Ltd. The Revenue contended that the assessee had received accommodation entries and failed to substantiate the details of the investors. The CIT (A) found that the assessee had provided sufficient evidence during the original assessment proceedings, and the reopening of the assessment was not justified as it was beyond four years and did not meet the criteria for such reopening under section 147 of the Act.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 23657 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2007-2008
• Other Referred Cases: CIT Vs. N.R. Portfolio Pvt. Ltd., CIT Vs. Nipun Builders and Developers Pvt. Ltd., CIT Vs. Navodaya Castles Pvt. Ltd.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIRUDH SARAN SINGH
• Assessee Lawyers: NITIN TANWAR
• Keywords: Difference of opinion; Change of opinion; Unexplained cash credit; Accommodation entries; Assessment record; Borrowed satisfaction; Bogus
• Section: 148; 143(3); 142(1); 68; 133(6)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘F’: NEW DELHI BEFORE SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER and SHRI SUDHIR KUMAR, JUDICIAL MEMBER ITA No.6149/DEL/2017 (Assessment Year: 2007-08) ITO, Ward 27 (3), vs. M/s. Nova Formworks Private Ltd., New Delhi. (formerly known as M/s. Wonder Mold Plast Pvt. Ltd., H-1237, DSIDC Indl. Area, Narela, New Delhi – 110 040. (PAN : AAACW6106G) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Nitin Tanwar, Advocate Shri Rajeev Kumar, Advocate REVENUE BY : Shri Anirudh Saran Singh, Sr. DR Date of Hearing : 07.11.2024 Date of Order : 22.01.2025 O R D E R PER S.RIFAUR RAHMAN,AM: 1. This appeal has been filed by the Revenue against the order of ld. Commissioner of Income-tax (Appeals)-13, New Delhi (hereinafter referred to as ‘ld. CIT (A)) dated 27.07.2017 for the assessment year 2007-08. 2. Brief facts of the case are, assessment under section 143(3) of the Income- tax Act, 1961 (for short ‘the Act’) was completed vide order dated 16.11.2009 at a total income of Rs.43,134/-. Subsequently, information 2 ITA No.6149/DEL/2017 received from Central Circle 11 that assessee had received accommodation entries to the tune of Rs.15 lakhs for business purpose from MARRASS. The abovesaid company was found to be controlled by Shyam Shankar Gupta who was providing accommodation entries through several companies/firms. After recording the reasons of initiation of proceedings u/s 147 of the Act and after obtaining prior approval from CIT, Delhi-VI, New Delhi, notice u/s 148 of the Act was issued and the assessee was asked to furnish return of income. In response, assessee vide letter dated 15.04.2014 intimated that earlier return of income filed on 30.10.2007 be considered for the purpose of proceedings initiated u/s 147 of the Act. As requested, the copy of reasons for initiation proceedings u/s 147 was supplied to the assessee vide letter dated 24.09.2014. Subsequently, notices u/s 142(1) were issued and served on the assessee. In response, assessee furnished details of capital / application money received along with confirmation of the invoices and copies of bank statement, ITR, etc.. 3. During assessment proceedings, the AO observed from the Balance Sheet that assessee had issued 2,71,000 shares on face value of Rs.10 each and premium was also charged of Rs.90 per share. He listed the details of shareholders at page 2 of the assessment order. In order to verify the genuineness of the transaction, he issued notices to all the investors and all the notices u/s 133(6) were received back or no reply was received. The ld. AR for the assessee was asked to produce the Directors of the investor 3 ITA No.6149/DEL/2017 company to which ld. AR for the assessee expressed his inability. Since assessee failed to submit confirmation from the abovesaid investors and not produced the Directors before him, accordingly he invoked the provisions of section 68 of the Act and added to the total income of the assessee. 4. Aggrieved, assessee preferred an appeal before the ld. CIT(A)-13, New Delhi and raised several grounds of appeal including jurisdictional issue and filed detailed submissions in this regard. In the assessee’s submission, assessee has submitted details of receipt of money as per which Rs.45 lakhs were received by them in the preceding assessment year i.e. AY 2006-07 and the balance was received in the current assessment year and for the sake of clarity, it is reproduced below :- AY 2006-07 AY 2007-08 Total Share Application Money Received in FY 2005-06 45,00,000/- - 45,00,000/- Share Application Money Received from MARRASS in FY 2006-07 - 15,00,000/- 15,00,000/- Share Application Money Received from other share Applicants in FY 2006-07 - 2,11,00,000/- 2,11,00,000/- Grand Total 45,00,000/- 2,26,00,000/- 2,71,00,000/- 5. After considering the written submissions of the assessee and the assessment order, ld. CIT (A) considered the submissions of the assessee that Rs.45 lakhs was received in the previous assessment year and as per the information received from Investigation Wing relating to transaction with MARRASS Industries Ltd. who has subscribed to the share capital of Rs.15 lakhs only. With regard to other share application money received from 4 ITA No.6149/DEL/2017 other applicants of Rs.2,11,00,000/- assessee has submitted all the relevant information during original assessment proceedings carried out u/s 143(3) of the Act. The ld. CIT (A) also considered the detailed submissions on the issue of making addition u/s 68 relating to share application money relying on several cases. In order to verify the contention of the assessee that all the informations were already submitted during original assessment proceedings, ld. CIT (A) asked for the assessment records. However, it was informed to him that records could not be traced. Further he observed that assessee has filed copies of assessment orders framed u/s 143(3) of the Act for AYs 2006-07 and 2007-08 and copies of covering letters submitted before AO in the original scrutiny proceedings, comprising confirmations, bank statement and ITR or share applications of a total amount of Rs.2,71,00,000/-. He observed that AO has not confronted with the evidences with assessee for reopening of the assessment that Rs.15 lakhs of share application money received from M/s. MARRAS Industries is an accommodation entry, let alone the evidence regarding the balance Rs.2,56,00,000/- including Rs.45,00,000/- pertaining to AY. Further he observed that the assessment could have been reopened considering the fact that it is reopened beyond four years only if the assessee had failed to disclose fully and truly all material facts necessary for assessment for that assessment year. Based on the available evidences indicate that the assessee had discharged its onus of providing identity, creditworthiness and 5 ITA No.6149/DEL/2017 genuineness of the transaction. He further observed that AO has not brought any evidence whatsoever to show that entire share application money is bogus. Since all the informations were already disclosed by the assessee in their books of account the addition u/s 68 of the Act is not sustainable, accordingly he deleted the additions. 6. Aggrieved with the above order, Revenue is in appeal before us raising following grounds of appeal :- “1. Whether in facts and circumstances of the case and in law. The Ld. CIT(A) is legally justified in deleting the addition of Rs. 2,71,00,000/- made u/s 68 of the IT Act on the basis of self serving evidence produced by the assessee in form of documents of paper companies used to provide accommodation entries to several hundred beneficiaries including the assessee and by ignoring finding of enquiry made by the Assessing Officer? 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in holding that finding details of PAN and ITR are sufficient evidence to discharge the onus of the assessee u/s 68 of the Act with regard to identity, genuineness of transaction and creditworthiness of the investors even when none of the investor was produced before the Assessing Officer for verification? 3. Whether on facts and circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the additions made u/s 68 on account of unexplained credits in respect of Share application money by completely ignoring the ratio decided laid down by Hon'ble High Delhi High Court on the issue in the cases of CIT Vs. N.R. Portfoilio Pvt. Ltd.(20174) 2 ITR-OL-68, CIT Vs. Nipun Builders and Developers Pvt. Ltd. (2013) 350 ITR 407, CIT Vs. Navodaya Castles Pvt. Ltd. (2014) 367 ITR 3065)?” 7. At the time of hearing, ld. DR for the Revenue fairly accepted that the assessment was reopened after four years and the original assessment order 6 ITA No.6149/DEL/2017 passed u/s 143(3) was placed on record at page 190 of the paper book dated 16.11.2009. He submitted that assessment was reopened based on the information that assessee has received accommodation entry from M/s. MARRAS Industries Ltd.. Since assessee could not substantiate the details of the investors of share application money, the AO proceeded to make the addition. Accordingly, he relied on the assessment order. 8. On the other hand, ld. AR for the assessee submitted that assessee has filed grounds under Rule 27 of the Income-tax Rules, 1962, he submitted that assessee has raised ground on the issue of reopening of the assessment. He submitted that assessment was completed after detailed verifications u/s 143(3) of the Act and assessment was reopened beyond four years. He brought to our notice page 167 of the paper book wherein the reasons recorded for reopening was enclosed and submitted that the reasons recorded were only with borrowed satisfaction and there is no investigation report with the AO at the time of recording of satisfaction. He further submitted that the sanction u/s 151(2) has to be obtained from JCIT as per the provisions of section 151 (2) of the Act. He brought to our notice page 67 of the paper book wherein reasons recorded for reopening was shared with the assessee as per which it was recorded that, “therefore in accordance with the provisions of section 151(2) of the Act sanction for issue of notice u/s 148 of the Act is being sought”. He brought to our notice page 202 of the paper book and submitted that nowhere in the assessment 7 ITA No.6149/DEL/2017 order it was highlighted that prior sanction was obtained before initiating the proceedings u/s 147 of the Act. 9. In the rejoinder, ld. DR for the Revenue submitted that relevant assessment records could not be traced, therefore, claim of the assessee could not be verified. 10. Considered the rival submissions and material placed on record. We observed from the record that the original assessment order u/s 143(3) was completed on 16.11.2009 and in that assessment, the issue under consideration was verified by the AO based on the various information submitted by the assessee in the form of paper book as well as submitted before the ld. CIT (A). However, in the assessment order, there was no discussion on this aspect. Further AO observed that based on the information from Central Circle with regard to obtaining accommodation entries from MARRASS Industries Ltd. for Rs.15 lakhs, reasons recorded for reopening of the assessment and, it shows that he reopened the assessment after lapse of four years. On careful consideration of the reasons recorded for reopening the assessment, the AO has not discussed or hinted on the aspect for failure on the part of the assessee particularly when provisions of section 147 (1) was attracted in this case. Since original assessment order was already passed u/s 143(3) of the Act and after due verification of the transaction, the AO allowed the same by accepting the same after verification of various documents submitted before him. Further 8 ITA No.6149/DEL/2017 we observed that ld. CIT (A) sought for the assessment records in order to verify the above submissions of the assessee, however no records were traceable at that point of time. Since the assessee has submitted relevant information with regard to submission of various informations relating to receipt of share application money. Since the issue involved is application of provisions to section 147(1) of the Act, non-recording of failure on the part of the assessee in the reasons recorded shows that the reopening of assessment is only change of opinion and also beyond jurisdiction and at this juncture, we do not see any reason to disturb the findings of the ld. CIT (A). 11. In the result, the appeal filed by the Revenue is dismissed. Order pronounced in the open court on this 22nd day of January, 2025. Sd/- sd/- (SUDHIR KUMAR) (S.RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 22.01.2025 TS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals), Delhi -44. 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "