TAX HOLDINGS PVT. LTD V. COMMISSIONER OF INCOME TAX

ITA/805/2011

AI Insights

The case involves M/S Tax Holdings Pvt. Ltd., the appellant, contesting an order from the Income-Tax Appellate Tribunal which remanded the matter back to the Assessing Officer for further investigation regarding the addition made under Section 68 of the Income-Tax Act. The issue stemmed from the assessee's receipt of share application money amounting to Rs. 8.50 lakhs from M/s Frenzy Products Pvt. Ltd., which was later questioned as being part of accommodation entries. The ITAT found that the assessee had not sufficiently proved the legitimacy of these transactions and thus remanded the case for a detailed examination of additional evidence.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 688422 (HC-DELHI)
• Appeal Type: Others
• Pronouncement Date: 01-01-2023
• Assessment Year: misc
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: DEEPAK CHOPRA
• Assessee Lawyers: KANAN KAPUR
• Keywords: Accommodation entries; Bogus entries; Income Tax; Reassessment; Share Application Money
• Section: 148; 68; 131; 133A

Judgement Text

"IN THE HIGH COURT OF DELHI AT NEW DELHI rTA 805 0F 20Ll- + % M/S TAX HOLDINGS PVT. LTD' Through: Mr. VERSUS COMMISSTONER OF INCOME TAX Through: Mr. j. tonau ,- , tudoment Delivered On: 24.8.2077 ....APPELLANT Kanan Kapur, Advocate. . ..RESPONDENT Deepak Chopra, Advocate. HON',BLE MR. JUSTICE A.K' SIKRI HON'BLE MR. JUSTICE M.L'MEHTA 1. Whether Reporters of Local newspapers may be allowed to see the Judgment? 2. To be referred to the Reporter or not? 3. Whether the Judgment should be reported in the Digest? A.K. SlKRl, | (Oral) 1. ' This appeal impugns the order dated 31't January, 20II passed by the lncome-Tax Appellate Tribunal whereby the Tribunal has remanded the matter back to the file of the Assessing Officer for his fresh adjudication. The issue pertains to the addition made by the Assessing officer under Section 68 of the Income-Tax Act (hereinafter referred to 'the Act'). However, according to the Tribunal some more tTA 805/11 Page 1 of 8 Digitally Signed By:AMULYA Certify that the digital file and physical file have been compared and the digital data is as per the physical file and no page is missing. Signature Not Verified n investigation is needed which resulted in restoring the case back toQK Assessing Officer. 2. Brief facts under which precise issue has arisen for consideration are noted hereinafter. The assessee is a private limited company. For the assessment year 2002-03 it had filed its return of income on l8th September 2002 showing business loss of { 5,00,000/-. This return was accepted as it *.,j5.However, the Assessing Officer subsequently received certain -s_ information from the ADI (lnv.) of the Department inter a/ia stating that a survey was conducted under Section 133A of the Act at the office premises of one Sh. sanjay Rastogi at 2ro, Vakil chamber, A-115, Shakarpur, Delhi on 4th March, 2003. The said survey revealed that Mr. Rastogi and his associates were giving accommodation entries on large scale to various companies. lt was noticed by the Department a that this activity of giving accommodation entries or bogus entries was .-,being carried out through bank accounts in different banks at Delhi and outside. Statement of Mr. Rastogi was also recorded on 20th April, 2003 under Section 131 of the Act wherein he had admitted the aforesaid facts. He also admitted that apart from the professional work, he was also providing certain services in connection with the rTA 805/11 Page 2 of 8 companies/concerns/entities that were not doing the real or genuine business and for that purpose, he has given his address at 210 Vakil Chamber, Vikas Marg, Delhi. Mr. Rastogi flouted certain companies which were used as conduit for providing accommodation entries or transactions, which were not real in nature. During further investigation it was found that the assessee company was also one of the beneficiaries of the bogus entries taken from one Ms/ Frenzy Products Pvt. Ltd. flouted by Shri Rastogi, from its account No.205, Corporation Bank Laxmi Nagar, Delhi. )-;1 In other words, information was received by the department that M/s Frenzy Products from its account No. 205, Corporation Bank, Laxmi Nagar, Delhi provided accommodation entries to the assessee Company. The details of the entries are as under:- a Date particulars of cheque 31.5.2001 ChequeNo. 0159426 6.10.2001 Cheque No. 0159446 j\" Amount paid t 4,00,000 T 4,50,000 Total: t 8,50,000 said information and copy of survey report Officer, he issued notice dated 16th August, of the Act and recorded his 'Reasons to il 3. On the received by 2004 under tTA 805/11 basis of the the Assessing Section l48 Page 3 of 8 Believe' that income to the extent of T 8.50 lacs had escaped assessment. Pursuant to the said notice, the assessee filed its return maintaining the original return wherein it had shown the business loss of t53,6401-. During the course of reassessment proceedings, it was noticed by the AO that the assessee had shown receipt of share gpplication money amounting to t9,60,000/- out of which Rs, 8,50,000/- was received from Ms/ Frenzy Products Pvt, Ltd. Notice under Section 133 (6) was issued to M/s Frenzy Products Pvt. Ltd which was served through registered post fixing the hearing on 72.9.2005. 1H'owever, no compliance of this notice was made. The assessee's authorized representative was then asked vide order sheet entry dated 13.9.2005 to produce the Principal Officer of M/s Frenzy Products Pvt. : Ltd. on 15.9.2005. Shri Mukesh Aggarwal, authorized representative for the assessee was present on 15.9.2005 and stated that Shri Sanjay Rastogi was not traceable at that moment. AO, therefore, treated the amount of Rs, 8,50,000 being share application money as unexplained ' within the meaning of Section 68 of the Act and added the same to the ''*assessee's total income. The assessee filed appeal thereagainst which was however, dismissed by the CIT (A) confirming the said addition. In further appeal filed by the assessee before the ITAT, the assessee had not succeeded in getting the said addition deleted. tTA 805/11 Page 4 of 8 ! However, at the same time the Tribunal has taken the view that matter is to be enquired afresh and remitted the case back to the Assessing officer for fresh adjudication. The ITAT has found that admittedly the assessee has shown the receipt of t 8.50 lacs on account of share application money allegedly received from M/s Frenzy Products Pvt. Ltd. in its books of accounts. The assessee had, however, submitted l. that it had given back t 5 lacs vide three account payee cheques dated I.3.2004,6.3.2004 and 11.3.2004 in the sum of t 1.5 lacs, t 1.5 lacs anc.l r 2 lacs respectively. The lrAT, however, observed that ,lhouOh the amount of t 8.5 lacs was received on 30.5.2001 (t 4 lacs on 31.5.2001 and T 4.5 lacs on 6.10.2001) which was admittedly received as share application money, repayment of T 5 lacs was made after a gap of more than two years. In other words, it is the assessee's Case that share to the extent of T 5 lacs were not allotted to the share applicant but the money was refunded. In the course of hearing of this appeal, the assessee was asked to point out the necessary evidences such as share application submitted by share applicant, and ,the letter of allotment as well as the letter for refunding the share application money. The ITAT found that the assessee has not filed any document or evidence such as share application submitted by the s.hare applicant and the letter of allotment and refund of share rrA 805/11 Page 5 of 8 'a qpplication money. The assessee had also not produced the details about the share register or the share certificate numbers and distinctive numbers of the share allegedly allotted by the assessee company to the share applicant in question, In other words, whether the amount of t 8.50 lacs was received by the assessee towards share application money had not been proved and established by the assessee by way of producing and furnishing the necessary evidence such as share application submitted by the applicant, letter of allotment, letter of refund of money and share register alongwith $rtiticate numbers and distinctive numbers allotted by the assessee to M/s Frenzy Products. I 4 On this basis, the ITAT recorded that initial onus was on the assessee to prove these facts which it had not discharged. The Tribunal, in this behalf, stated as under:- a \"lt was the assessee's argument at the time of hearing that present case is to be decided in the light of proposition laid down by the Hon'ble Delhi High Court in the case of Divine Leasing & Finance Ltd. (supra).\" 5. After giving the aforesaid findings, the Tribunal could have dismissed the appeal affirming the appeal of the CIT(A). However, the Tribunal still chose to give another opportunity to the assessee tTA 805/r.r. Page 6 of 8 a thinking that sufficient opportunity to discharge prima facie burden was not provided to the assessee. lt, thus held as under:- \"We are, therefore of the considered view that if one more opportunity is given to the assessee to prima-facie prove his case by submitting the various details in the manner as laid down by the Hon'ble Delhi High Court in the case of Divine Leasing & Finance Ltd., it would meet the ends of iustice. We, therefore, restore the matter back i to the file of the AO for fresh adjudication, after providing reasonable opportunity to the assessee to produce share application form in original, shareholder register, share transfer register, shaie allotment register and refund of share application money alongwith PAN/GlR number of the alleged share applicant M/s Frenzy Products and their lT records and other details as so laid down in the decision of Divine Leasing & Finance Ltd. and Lovely Exports (supra). The assessee shall also explain that how the share application money received on 31.5.2001 and 6.10.2001 has been retained for such a long time without there being allotment and under what provision the share application money of t 5 lakhs was allegedly refunded in the month of March, 2004. The assessee shall also produce the board of directors' meeting register to explain .as to how and in what manner the shares to the extent of t 3,50,000/- were allegedly allotted to M/s Frenzy Products and the balance sum of { 5 lakhs was refunded. All these aspects of the matter have to be explained by the assessee in order to discharge its initial burden to prove that the assessee has received share application money from M/s Frenzy Products. The assessee is hereby directed to discharge its initial burden in the manner as laid down by the Hon'ble Delhi High Court in the case of Divine Leasing & Finance Ltd. and Lovely Exports p. Ltd. (supra) and as indicated above. /,, tTA 805/11 Page 7 of 8 v In case during the qourse of fresh assessment proceedings, if the assessee is able to discharge its initial burden, the department shall be free to rebut the assessee's case after providing opportunity to cross examine Shri Sanjay Rastogi before using his statement recorded by the Investigation Wing, and shall allow the assessee an opportunity to rebut all the material and information that have been collected by the department and used against the assessee before rejecting the assessee's case.\" 6. On reading the order and hearing the counsel for the parties, we are of the opinion that the Tribunal has shown benevolence to the rO iJ ssessee by giving another opportunity. There is no reason for the order. 7 No substantial question of law arises. This dismissed. appeal is accordingly assessee to nurture grudge against such an tft* (h.K. SIKRI) JUDGE a 1 .-2 c-(,4^tln1, (lvt.l-. MEHTA) JUDGE nlicusr 24,zoLL. skb tTA 805/11 Page 8 of 8 "