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ITA-183/2002 & 1638/2006 Page 1
* IN THE HIGH COURT OF DELHI AT NEW DELHI
RESERVED ON: 01.08.2012 PRONOUNCED ON: 24.08.2012
+
ITA 183/2002
CIT-IV
..... Appellant Through: Mr. N.P. Sahni, Sr. Standing Counsel.
versus
M/S FROSTAIR P.LTD ..... Respondent
Through: Dr. Rakesh Gupta, Ms. Rani Kiyala and Mr. Piyush Singh, Advocates.
+
ITA 1638/2006
COMMISSIONER OF INCOME TAX ..... Appellant
Through: Mr. Sanjeev Sabharwal, Sr. Standing
Counsel.
versus
M/S FROSTAIR P.LTD ..... Respondent Through: Dr. Rakesh Gupta, Ms. Rani Kiyala and Mr. Piyush Singh, Advocates.
CORAM: MR. JUSTICE S. RAVINDRA BHAT MR. JUSTICE R.V. EASWAR
MR. JUSTICE S.RAVINDRA BHAT %1. This common judgment will dispose of Revenue’s two appeals directed against the judgment and order of the Income Tax 2012:DHC:5171-DB
ITA-183/2002 & 1638/2006 Page 2
Appellate Tribunal (ITAT) dated 30.10.2001 in ITA No.1868/DEL/2001 and further order dated 11.05.2006 in ITA- 4691/DEL/2002, and cross-objection nos.113/DEL/2006. 2. The question of law framed in these two cases was: “(i) whether the ITAT erred on facts and in law in deleting the addition of Rs. 25 Lakhs made by the AO by treating the alleged investment of shareholders as income from undisclosed sources (ITA-183/2002) and (ii) whether the ITAT was correct in law in deleting the penalty of Rs. 44 Lakhs imposed by the AO under Section 271 (i) (c) of the Income Tax Act, 1961.”
The brief facts necessary to decide the cases are that the assessee company had filed its return declaring the income @ `.10,986/- on 29.11.1996. The Revenue received information alleging that assessee had accepted share capital from companies engaged in providing bogus entries in the form of loan and share application money to interested parties. Accordingly, the AO called for information under Section 142 (1) by letter dated 29.12.1998. The assessee filed a list of shareholders who contributed share capital including premium aggregating to `.95 Lakhs. It transpired that the assessee had increased its share capital by `.95 Lakhs to which end it had issued 9500 shares of a face value of `.100/-, at a premium of `.900/- each. The total amount was invested by 18 companies who were share applicants. The AO felt that the nature of the assess company and its business was not such as to attract a premium of `.900/- per share. He also was of 2012:DHC:5171-DB
ITA-183/2002 & 1638/2006 Page 3
the opinion that the share applicants were not known to the assessee or its management and investment of `.5 Lakh by each of them except M/s Kanpur Properties and Finance Ltd. - which had invested `.10 Lakhs was improbable. The concerned Assessing Officers in respect of the 18 shareholders were notified. The AO was informed that in most of the cases, no such company existed in their ward or circle. The AO accordingly issued summons to all shareholders at their given address. None of the addresses were found to be correct. On the other hand, during the course of enquiries, one Shri R.C. Goela accepted summons on behalf of six parties. He did not, however, acknowledge any of the summons personally; they were acknowledged by six different persons in his office. He appeared before the AO on 5.3.1999 and admitted that he represented all companies and one M/s Devlok Finance Ltd. Separate summons were issued to R.C. Goela asking him to produce the principal officers of the companies with their books of accounts. This was not complied with and instead six envelopes containing information and copies of bank accounts in respect of five concerns (who he claimed to represent) were sent. All of them were sent from one post office by R.C. Goela. The AO inferred that the identity and credit worthiness of those five concerns have not been proved. The AO went into great details about the bank accounts and related details of the companies and found that they were operated from Vaish Cooperative Adarsh Bank Ltd; the bank accounts were opened due to an introduction by R.C. Goela. The assessee’s arguments were that the identity of the companies or 2012:DHC:5171-DB
ITA-183/2002 & 1638/2006 Page 4
other persons could be ascertained through GIR/PAN, was rejected since the share applicants who were contributed monies were not filing IT returns. The availability of particulars of 18 share applicants with the