CIT vs. SUPER STAR INNOVATION LTD

IN THE HIGH COURT OF DELHI AT NEW DELHI . ITA 361/2012 and CM 9519/2012 . . . CIT ..... Appellant . Through: Mr. Deepak Chopra, Advocate . . . versus . . . SUPER STAR INNOVATION LTD ..... Respondent . Through . . . CORAM: . HON'BLE MR. JUSTICE SANJIV KHANNA . HON'BLE MR. JUSTICE R.V.EASWAR . . . O R D E R . 23.05.2012 . . . This is an appeal under Section 260A of the Income Tax Act, 1961 (in short, ?the Act?) filed by the revenue impugning the order dated 4.11.2011 passed by the Tribunal. It is averred and stated in the grounds of appeal that the order passed by CIT (A) is cryptic and is a non- speaking/ non-reasoned order. . The two additions made by the Assessing Officer which are the subject matter in the instant appeal have been dealt with in the block assessment order as under: . . . ?During the course of search and seizure action incriminating documents were seized as per Annexures A-108 from A-99, New Palam Vihar, Gurgaon. Page 59, 70 to 72, 60 to 69 and 75 to 75 are the blank share transfer . forms, blank power of attorney, forms of renunciation signed by the directors of M/s Sara Overseas Pvt. Ltd., and M/s Inspiration Securities Pvt. Ltd. It was also seen that these two companies have subscribed Rs.5 lac each to the share capital of M/s Super Star Innovations Pvt. Ltd. No books of account or any kind of material substantiating the existence of M/s Super Star Innovations Pvt. Ltd., was found. A question being question no.17 of questionnaire dated 23.09.2002 was put to the assessee to explain why the subscription of Rs.5 lac each by these two companies should not be taken as bogus. The A.R. of the assessee has furnished copy of affidavit of Shri M.K. Jha, the director of M/s inspiration Security Pvt. Ltd. The address of director of M/s Inspiration Security Pvt. Ltd., as given in copy of the affidavit is A-115, Vakil Chambers, Shakarpur, New Delhi. Summons under Section 131 was issued at the above address to the director of the Inspiration Security Pvt. Ltd. The director of Shri Rajesh Rastogi attended on 25.10.2002 and his statement was recorded. As per his statement his company M/s Inspiration Security Pvt. Ltd. has not invested any sum in M/s Super Star Innovations Pvt. Ltd. In views of this, the subscription of share capital of Rs.5 lac from the director of M/s Inspiration Security Pvt. Ltd., is taken as bogus and is treated as undisclosed income of the company. . . . Similarly, summons under Section 131 issued to director of M/s Sara Overseas Pvt. Ltd. 7530, Galaxy Apartment, Paharganj, New Delhi was sent through Inspector attached to this Circle. The inspector has reported that the company is not traceable at the given address. He requested for Gali No. to trace out the company. The AR of the assessee was confronted with the Inspector?s report but did not furnish the Gali No. thus the assessee company has failed to discharge its onus. As such the subscription of Rs.5 lac from M/s Sara Overseas Pvt. Ltd to share capital of M/s Super Star Innovations Pvt. Ltd. is treated as bogus and is included in the undisclosed income of the assessee. . . . From the perusal of the bank accounts No.27765 of Mrs. Radha Aggarwal, an entry of Rs.75,000/- just before the amount given as share capital to M/s Super Star Innovations Pvt. Ltd. Therefore, the above subscription to share capital of Super Star Innovations Pvt. Ltd. is treated as not genuine and is treated as undisclosed income and added to the income of the assessee for F.Y. 1996-97 i.e. A.Y. 1997-98. . . . From the seized material it was found that the assessee company has purchased following plots of land:- . . . . . . . Annexure No. Page No. . Plot No. . Date . Name of seller . Area of plot in sq. yards . Consideration (in Rs.) . Remarks . A-52 . 58-60 . C-174 . 02.11.1995 . Kapil Mehta s/o R.L. Mehta . 160 . 60000 . Agreement . A-111 . 33-35 . 7.10.1999 . Nand Kishore s/o Ram Kala . 16K . 1400000 . Agreement . A-112 . 36-38 . 5.10.1999 . Nand Kishore . s/o Ram Kala . 16K . 140000 . Agreement . A-112 . 1-5 . F-95 . 4.1.2000 . Savtri Devi Gupta w/o J.P. Gupta . 479 . 179625 . Agreement . A-112 . 6-10 . B-183 . 22.11.99 . Rakesh Bajaj s/o M.L. Bajaj . 200 . 75000 . Agreement . A-112 . 11 to 15 . C-174 . 6.2.2000 . Nisha Mehta w/o R.L. Mehta . 160 . 60000 . Agreement . A-112 . 16-22 . C-174 . 6.2.2000 . Kapil Mehta and Vikas Mehta . 160 . 60000 . Agreement . A-112 . 23 to 26 . F-385 . 19.1.2000 . Dinesh Man s/o V.P. Man . 200 . 75000 . Agreement . . . . . The assessee vide question No.1 of questionnaire dated 11.10.2002 was requested to explain the source of purchase was disclosure or not. The assessee vide its letter dated 25.10.2002 has explained that purchase of these plots have been recorded in the regular books of accounts. However, he has not explained the source of income. As such addition of Rs.33,09,625/- on this account is made to the undisclosed income of the assessee.? . . . The respondent was incorporated on 25th July, 1995. For the period relevant to the assessment year, the share capital of the respondent assessee was enhanced by subscription of Rs.5 lakh each by Sara Overseas Pvt. Ltd. and Inspirational Securities Pvt. Ltd. Rs.75,000/- towards share subscription was also paid by Ms. Radha Aggarwal. The original return for the assessment year 1998-99 was taken up for scrutiny and no addition on this account was made by the Assessing Officer. He accepted increase/enhancement of share capital after verification. . Subsequently, there was a search at the premises of the assessee respondent on 17th October, 2010 and block assessment proceedings for the period 1.4.1990 to 17.10.2000 were initiated. The present appeal arises from the said block assessment proceedings. . The CIT(Appeals) deleted the said two additions. The tribunal has confirmed the said order. . We examined the reasons given by the CIT (Appeals) and the tribunal under challenge. Merely three questions were put to Mr. Rajesh Rastogi during his statement under Section 131 of the Act, recorded on 25th October, 2002. He had stated on oath that he was a director for roughly four or five months in 1995 and he (i.e. I) had not invested any money in the respondent assessee. He had also stated that he did not remember having opened any bank account in the name of the company Inspiration Securities Pvt. Ltd. The investment in the respondent company by the Inspiration Securities Pvt. Ltd. were made on 12th December, 1995. The share application form, confirmation issued by Kapil Bhalla director of Inspiration Securities Pvt. Ltd. and statement of bank account of Inspiration Securities Pvt. Ltd., was not put to and confronted to Rajesh Rastogi. He was not asked to admit or deny the said documents. Case of the respondent assessee is that this statement was recorded behind their back and relevant questions were not put to Mr. Rajesh Rastogi. . Similarly with regard to Sara Overseas Pvt. Ltd., it has been observed that the enquiries conducted by the Assessing Officer were incomplete. Assessee has furnished confirmation given by Arjun Mishra and copy of the bank account of the said company. Payment was made by account payee instrument. Details of the Assessing Officer of Sara Overseas Pvt. Ltd., i.e. Ward No. etc. were furnished. The Assessing Officer had relied upon report of the Inspector who could not trace out the property. No further enquiries were made by the Assessing Officer. . Radha Aggarwal had made subscription by making payment by account payee instrument. Copy of bank account was furnished. She was also assessed to income tax. . There is no allegation or averment and no evidence or material to show and establish that the said persons were accommodation entry providers and the assessee had circulated his unaccounted for money through them. . With regard to additions on account of purchase of land, the Assessing Officer did not dispute that the purchases were recorded in the regular books of accounts. In these circumstances, the Assessing Officer was required to examine whether the assessee had sufficient funds to purchase the said plots. A reading of the assessment order shows that this exercise was not conducted. The Assessing Officer has merely recorded that the assessee was not able to explain the source. He has, however, not referred to the entries in the books of accounts which he doubted and felt as cannot be explained. It is not the case of the Revenue that payments were made in cash. Payments made through bank . accounts can be verified and collated with the credit entries in the bank account. There is no discussion on the said aspect. The CIT (Appeals) and the tribunal have deleted the said additions after observing that the Assessing Officer has ignored the evidence which was produced by the assessee. They have also recorded that the Assessing Officer has taken the investment in one plot twice, thus a double addition was made. . Findings recorded by the CIT(Appeals) and the tribunal were findings of fact and are not perverse. We do not find any merit in the appeal. The same is accordingly dismissed. There will be no order as to costs. . SANJIV KHANNA, J . . . . . R.V.EASWAR, J . MAY 23, 2012/kkb . 26 .