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Income Tax Appellate Tribunal, DELHI ‘C’ BENCH,
Before: SHRI N.K. BILLAIYA, & MS. ASTHA CHANDRA
PER N.K. BILLAIYA, ACCOUNTANT MEMBER:-
This appeal by the assessee is preferred against the order of the ld. CIT(A) - 31 New Delhi dated 27.12.2018 pertaining to Assessment Year 2012-13.
The substantive grievance of the assessee is that the ld. CIT(A) erred in confirming the addition of Rs. 2,96,48,700/- made by the Assessing Officer u/s 68 of the Income-tax Act, 1961 [hereinafter referred to as 'The Act'] and the second grievance relates to the disallowance of Rs. 9,77,970/- made by the Assessing Officer on account of foreign travel expenses which was upheld by the ld. CIT(A).
The other grounds taken in Form No. 36 were not pressed.
Accordingly, the same are dismissed as not pressed.
The representatives of both the sides were heard at length, the case records carefully perused.
Briefly stated, the facts of the case are that during the course of scrutiny assessment proceedings, and on perusal of the financial statements, the Assessing Officer came to know that the assessee has issued 65,886 shares at premium, for total amount of Rs. 2,95,56,417/.
When called for, the assessee furnished the details of share application money and share holders which is as under:
Sr. Particulars Amount No. of Share Share No. (Rs.) shares Capital Premium @ issued @ (Rs.) 450 each 10 each (Rs.) i) M/s Karda Traders (P) Ltd. 6666 66,660 29,33,040 29,99,700 ii) 48,88,840 49,99,950 M/s Capative Equity Management (P) 11111 1,11,110 Ltd. M/s Neat & Clean Infratech (P) Ltd. iii) 5555 55,550 24,44,200 24,99,750 iv) M/s Movers Realtech (P) Ltd. 3333 33,330 14,66,520 14,99,850 M/s Shree Aeran Marketing (P) Ltd. v) 17000 1,70,000 74,80,000 76,50,000 vi) M/s Macro IT Systems (P) Ltd. 5555 55,550 24,44,200 24,99,750 vii) M/s Sai Infoweb (P) Ltd. 5555 55,550 24,44,200 24,99,750 viii) M/s Europas Meditecnik Industries 48,88,840 49,99,950 11111 1,11,110 Ltd. Total 65886 6,58,860 2,89,89,840 2,96,48,700/
Vide notice dated 09.02.2015, the Assessing Officer asked the assessee to provide copy of share application form alongwith copy of share allotment register, members register and copy of share certificate.
The said notice was returned unserved.
The Assessing Officer further issued notice u/s 133(6) of the Act to two companies, namely, M/s Karda Traders [P] Ltd and M/s Captive Equity Management [P] Ltd. Both the notices were received back with the remarks “Incorrect Address”.
The assessee was asked to show cause as to why share premium and share application money should not be added back to the total income of the assessee u/s 68 of the Act.
On receiving no plausible reply, the Assessing Officer came to the conclusion that the assessee has not discharged the primary onus cast upon it by provisions of section 68 of the Act and concluded the assessment by making addition of Rs. 2,95,56,417/-.
The Assessing Officer further made addition of Rs. 9,77,970/- on account of foreign travel expenses.
Additions were challenged before the ld. CIT(A) but without any success.
Before us, the ld. counsel for the assessee vehemently stated that the assessee has placed on record entire evidence and material to discharge the burden which lay upon it u/s 68 of the Act. The ld. counsel for the assessee drew our attention to the additional evidences filed before the ld. CIT(A) with application u/r 46A of the Rules.
It is the say of the ld. counsel for the assessee that the assessee has furnished complete details and evidences in the shape of confirmations, Income tax particulars, bank statements and audited financial statements of share holder companies to discharge the burden in respect of section 68 of the Act.
The ld. counsel for the assessee further stated that no enquiries were made either from the share holder by issuing notice u/s 131 of the Act nor from the Registrar of Companies. The ld. counsel for the assessee drew our attention to the various judicial decisions relied upon by the assessee in his written submissions and concluded by saying that it is not the case of the Revenue that any share holders have denied investment made in the assessee company, nor the documents placed could be disproved by the Revenue and, therefore, addition should be deleted.
Per contra, the ld. DR placed strong reliance on the orders of the authorities below and read the relevant part of the assessment order and the order of the ld. CIT(A).
We have given thoughtful consideration to the orders of the authorities below. It is not in dispute that the assessee has furnished complete details in relation to share applicant companies, their confirmations, Income tax particulars, bank statements and financial statements. The evidences include the following:
i) Name and address of the investor; ii) PAN of the investor; iii) Income tax Jurisdiction of the investor; iv) Detail of amounts received and made of receipt, cheque no, date of cheque, amount of cheque; v) Confirmation by the investor company; vi) Share application form and share certificate; vii) Bank statement of the investor company; viii) Master dat from ROC online sites of the investor company showing them as active company; and ix) Acknowledgement of return of income of the investor company alongwith audited financial statements.
The entire basis for dismissing the vortex of evidences is the fact that the notice u/s 133(6) of the Act issued by the Assessing Officer was returned unserved.
The Hon'ble High Court of Delhi in the case of PCIT Vs. Radius Industries and CM Application Nos. 28829 to 28830/2022 order dated 04.07.2022 has categorically held that “It is settled law that non compliance of notice u/s 133(6) of the Act to all the entities giving unsecured loans cannot be sole basis for making addition u/s 68 of the Act”.
It would be per pertinent to refer to the observations made by the Hon'ble High Court of Delhi in the case of CIT Vs. Kamadhenu Steel and Alloys Ltd 361 ITR 220 and same read as under:
“6. What kind of proof is to be furnished by the assessee, is the question. It has come up for discussion in various judgments rendered by this Court, other Courts as well as the Supreme Court. The law was discussed by a Division Bench of this Court in the case of Commissioner of Income Tax Vs. Divine Leasing and Finance Ltd. [299 ITR 268]. Since the entire gamut of case law as on that date was visited in the said judgment, we may initiate our discussion by taking note of this case. In this case, the Court highlighted the menace of conversion of unaccounted money through the masquerade or such channels of investment in the share capital of a company and thus stressed upon the duty of the Revenue to firmly curb the same. It was also observed that, in the process, the innocent assessee should not be unnecessary harassed. A delicate balance must be maintained. It was, thus, stressed:
"15. There cannot be two opinions on the aspect that the pernicious practice of conversion of unaccounted money through the masquerade or channel of investment in the share capital of a company must be firmly excoriated by the Revenue. Equally, where the preponderance of evidence indicates absence of culpability and complexity of the assessed it should not be harassed by the Revenue‟s insistence that it should prove the negative. In the case of a public issue, the Company concerned cannot be expected to know every detail pertaining to the identity as well as financial worth of each of its subscribers. The Company must, however, maintain and make available to the AO for his perusal, all the information contained in the statutory share application documents. In the case of private placement the legal regime would not be the same. A delicate balance must be maintained while walking the tightrope of Section 68 and 69 of the IT Act. The burden of proof can seldom be discharged to the hilt by the assessed; if the AO harbours doubts of the legitimacy of any subscription he is empowered, nay duty-bound, to carry out thorough investigations. But if the AO fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the Company."
XXX XXX
15. At this stage, we would like to refer to the judgment of the Bombay High Court in the case of CIT Vs. M/s Creative World Telefilms Ltd. (in of 2009 decided on 12.10.2009). The relevant portion of this order is reproduced below:
"In the case in hand, it is not disputed that the assessee had given the details of name and address of the shareholder, their PA/GIR number and had also given the cheque number, name of the bank. It was expected on the part of the Assessing Officer to make proper investigation and reach the shareholders. The Assessing Officer did nothing except issuing summons which were ultimately returned back with an endorsement 'not traceable'. In our considered view, the Assessing Officer ought to have found out their details through PAN cards, bank account details or from their bankers so as to reach the shareholders since all the relevant material details and particulars were given by the assessee to the Assessing Officer. In the above circumstances, the view taken by the Tribunal cannot be faulted. No substantial question of law is involved in the appeal. XXXX XXX 21. We may also usefully refer to the judgment of the Supreme Court in the case of Commissioner of Income Tax Vs. P. Mohanakala [(2007) 291 ITR 278 (SC)]. In that case, the assessee had received foreign gifts from one common donor. The payments were made to them by instruments issued by foreign banks and credited to the respective accounts of the assessees by negotiations through bank in India. The evidence indicated that the donor was to receive suitable compensation from the assessees. The AO held that the gifts though apparent were not real and accordingly treated all those amounts which were credited in the books of account of the assessee, as their income applying Section 68 of the Act. The assessee did not contend that even if their explanation was not satisfactory the amounts were not of the nature of income. The CIT (A) confirmed the assessment. On further appeal, there was a difference of opinion between the two Members of the Appellate Tribunal and the matter was referred to the Vice President who concurred with the findings and conclusions of the AO and the CIT (A). On appeal, the High Court re- appreciated the evidence and substituted its own findings and came to the conclusion that the reasons assigned by the Tribunal were in the realm of surmises, conjecture and suspicion. On appeal to the Supreme Court, the Court while reversing the decision of the High Court held that the findings of the AO, CIT (A) and the Tribunal were based on the material on record and not on any conjectures and surmises. That the money came by way of bank cheques and was paid through the process of banking transaction as not by itself of any consequence. The High Court misdirected itself and erred in disturbing the concurrent findings of fact. While doing so, the legal position contained in Section 68 of the Act was explained by the Supreme Court by assessing that a bare reading of Section 68 of the Act suggests that (i) there has to be credit of amounts in the books maintained by the assessee; (ii) such credit has to be a sum of money during the previous year; and (iii) either (a) the assessee offers no explanation about the nature and source of such credits found in the books or (b) the explanation offered by the assessee, in the opinion of the AO, is not satisfactory. It is only then that the sum so credited may be charged to income tax as the income of the assessee of that previous year. The expression "the assessee offers no explanation" means the assessee offers no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. The opinion of the AO for not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on the record. The opinion of the AO is required to be formed objectively with reference to the material on record. Application of mind is the sine qua non for forming the opinion. In cases where the explanation offered by the assessee about the nature and source of the sums found credited in the books is not satisfactory there is, prima facie, evidence against the assessee, viz., the receipt of money. The burden is on the assessee to rebut the same, and, if he fails to rebut it, it can be held against the assessee that it was a receipt of an income nature. The burden is on the assessee to take the plea that even if the explanation is not acceptable, the material and attending circumstances available on record do not justify the sum found credited in the books being treated as a receipt of income nature.”
In light of the aforementioned judicial rulings, we find that in the case in hand, the investors throughout have confirmed the investment and no material has been led by the Assessing Officer to even allege that such investment was made from the coffers of the assessee company as it is not the case of the Revenue that the assessee has purchased cheque by paying cash to the investor company.
The investors are corporate entities duly assessed to tax and have made investment through banking channel from their own sources which fact has neither been denied nor rebutted in the assessment nor by the first appellate authority.
Considering the facts of the case in totality, we are of the considered opinion that the assessee has discharged the primary onus cast upon it by provisions of section 68 of the Act. It is not the case of the Revenue that the assessee is a beneficiary of accommodation entry.
The Assessment Year under consideration is Assessment Year 2012-13 and for this Assessment Year, the assessee is not required to establish source of source.
In view of the evidences brought on record and referred to hereinabove, we direct the Assessing Officer to delete the addition of Rs. 2,96,48,700/-. Ground No. 2 with all its sub grounds is allowed.
Other grounds as mentioned elsewhere, were not seriously pressed by the ld. counsel for the assessee. Therefore, the same are dismissed as not pressed.
In the result, the appeal of the assessee in is partly allowed.
The order is pronounced in the open court on 11.07.2022.