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Income Tax Appellate Tribunal, DELHI BENCHES “C” : DELHI
Before: SHRI BHAVNESH SAINI & SHRI B.R.R. KUMAR
This appeal by assessee has been directed against the Order of the Ld. CIT(A)-23, New Delhi, Dated 10.02.2020, for the A.Y. 2009-2010.
2 ITA.No.1302/Del./2020 M/s. Garima Polymers Pvt. Ltd., New Delhi. 2. We have heard the Learned Representative of both the parties through video conferencing and perused the material available on record.
Briefly the facts of the case are that the return of income was filed by the assessee on 26.03.2011 declaring a total income of Rs.2,75,250/-, which was processed under section 143(1) of the Income Tax Act, 1961. A search and seizure action under section 132 of the Income-Tax Act, 1961 was carried-out in the case of Shri Mukesh Gupta Group 21.05.2009. This case was centralized with this Circle of the A.O. by CIT-IV, New Delhi. As the assessee failed to comply with the statutory notices, an ex-parte assessment order was passed under section 144 of the Income-Tax Act, 1961, on the basis of material available on record and the A.O. made the following additions (1) Unexplained Share Application Money - Rs.9,50,000/- (2) Unexplained Loan - Rs.1,50,00,000/- (3) Administrative and Financial Expenses unverifiable - Rs.29,063/-.
3 ITA.No.1302/Del./2020 M/s. Garima Polymers Pvt. Ltd., New Delhi. 3.1. The assessee preferred an appeal before the Ld. CIT(A) which was dismissed.
3.2. The assessee preferred an appeal before the ITAT challenging the validity of the assessment order passed under section 153 of the Income-Tax Act, 1961 and the additions of Rs. 9,50,000/- and Rs.1.50 crores, which has decided the appeal of assessee for the assessment year under appeal i.e., 2009-2010 as well as A.Y. 2010-2011 through combined Order dated 27.03.2017 and observed that primary evidences would go to the root of the matter, therefore, matter was remanded to the file of A.O. for examining the confirmation of creditors and to decide the matter afresh after making thorough enquiries as may thinks fit.
3.3. The A.O, thereafter, taken-up the matter for assessment. The A.O. noted certain dates, on which, there were no compliance by the assessee. During the assessment proceedings, from perusal of the records, it has been found that assessee-company has raised share
4 ITA.No.1302/Del./2020 M/s. Garima Polymers Pvt. Ltd., New Delhi. application money of Rs.9,50,000/- and also raised unsecured loans amounting to Rs.1.50 crores in assessment year under appeal and the details of the same are as under :
Share Application Money 1. Smt. Renu Rekhan Rs. 3,50,000/- 2. Smt. Nisha Rekhan Rs. 6,00,000/- Unsecured loans 1. Ankit Rekhan Rs. 40,00,000/- 2. Kshitiz Infratech Pvt. Ltd., Rs. 50,00,000/- 3. Nitin Rekhan 4. Gaurav Bhasin Rs. 10,00,000/- 5. Star Technosoft Pvt. Ltd., Rs. 10,00,000/- Rs. 40,00,000/- Total Rs.1,59,50,000/- 3.4. The assessee vide letter Dated 01.03.2018 submitted confirmation of abovementioned persons except of Star Technosoft Pvt. Ltd. The assessee vide letter Dated 21.05.2018 further submitted ITRs of the abovementioned persons except of Star Technosoft Pvt. Ltd. The assessee also submitted bank statements of the above creditors except Star Technosoft Pvt. Ltd. and also submitted audit report of Kshitiz Infratech Pvt. Ltd., for A.Y. 2009-2010. The A.O. from the above documents observed that (1) income declared in the ITRs of all the six parties was very low as 5 ITA.No.1302/Del./2020 M/s. Garima Polymers Pvt. Ltd., New Delhi. compared to the corresponding transactions (2) in the balance sheet of Kshitiz Infratech Pvt. Ltd., the amount of Rs.50 lakhs was shown as advance given against property, while the assessee has shown the same as unsecured loan. (3) From the bank account of Ankit Rekhan there was usually very low balance in the account except for some period during which large amounts were credited and have been debited. The A.O, further asked for the audit report of the company and regarding details of any property sold to Kshitiz Infratech Pvt. Ltd., and loans returned to the parties and if shares have been allotted to the share applicants. No compliance was made. The assessee also made an application under section 144A of the I.T. Act to the JCIT, Central Range, which was also disposed of. The A.O. in order to ascertain the identity and creditworthiness of the above-mentioned creditors and share applicants, issued summons under section 131(1) on 17.05.2018 and the case was fixed for 24.05.2018. In response to summons, none of the above seven parties appeared before A.O. on the given date. Reply from Star Technosoft Pvt. Ltd., was received on 6 ITA.No.1302/Del./2020 M/s. Garima Polymers Pvt. Ltd., New Delhi. 25.05.2018 wherein it enclosed copy of the ITR for A.Ys. 2009-2010 and 2010-2011 and copy of the bank book and ledger account of Assessee [M/s. Garima Polymers Private Limited]. No copy of their bank account has been filed. The A.O, therefore, made addition of Rs.9,50,000/- on account of unexplained share capital and since the unsecured loans received from 5 parties have also not appeared before A.O. in response to the summons under section 131 of the I.T. Act, therefore, same were also treated as unexplained unsecured loans and addition of Rs.1.50 crores was made.
3.5. The assessee filed an appeal before the Ld. CIT(A) and also raised additional ground of appeal that assessment completed is time barred and that additions on merit are wholly unjustified. The Ld. CIT(A), however, decided both the issues against the assessee. The Ld. CIT(A) also observed that since there was non-compliance to the summons issued by the A.O, therefore, onus upon assessee to prove genuine credits have not been discharged. The Ld. CIT(A), accordingly, dismissed the appeal of the assessee.
7 ITA.No.1302/Del./2020 M/s. Garima Polymers Pvt. Ltd., New Delhi.
The Learned Counsel for the Assessee as regards the unexplained share capital has referred to PB-93 to 96 which are confirmations of the share applicants and their ITRs. In respect of the remaining unsecured loans, Learned Counsel for the Assessee referred to PB-97 to 122 and submitted that in the case of first 04 creditors, the assessee has filed their conformations, ITR, bank statements and in case of Kshitiz Infratech Pvt. Ltd., copy of the balance sheet is also filed. In case of Star Technosoft Pvt. Ltd., assessee filed confirmation of the creditor and also filed letter before the A.O. Dated 21.05.2018 requesting to issue summons to the concerned Bank to obtain copy of the bank accounts of the creditors as well as to Star Technosoft Pvt. Ltd., for further examination. Learned Counsel for the Assessee, therefore, submitted that the initial onus upon the assessee had been discharged to prove the identity of the share applicants/creditors, their creditworthiness and genuineness of the transaction. He has submitted that since the A.O. did not issue summon to the Bank of creditor Star Technosoft Pvt. Ltd., as well as did not enforce its 8 ITA.No.1302/Del./2020 M/s. Garima Polymers Pvt. Ltd., New Delhi. attendance, therefore, no adverse inference could be drawn against the assessee. He has submitted that A.O. has issued summons against the share applicants and creditors only on 17.05.2018 for 24.05.2018 and no further efforts have been made to enforce their attendance and passed the assessment order on 31.05.2018. Therefore, no sufficient time is given to the creditors to appear before A.O. to confirm the transactions. He has also referred to Order of Ld. CIT(A)-23, Dated 06.07.2020 for A.Y. 2010-2011 in which the same CIT(A) did not consider non-compliance of summons as sufficient to make addition under section 68 of the Income Tax Act in the case of same assessee. Learned Counsel for the Assessee relied upon the following decisions:
1. 1. CIT-IV vs., Dwarkadhish Investment (P.) Ltd., [2011] 330 ITR 298 (Del.).
2. Mod Creations (P.) Ltd., vs., ITO [2013] 354 ITR 282 (Del.) 3. CIT vs., Varinder Rawlley [2014] 366 ITR 232 (P & H) 4. Pr. CIT vs., Himachal Fibers Ltd., [2018] 98 taxmann.com 173 (SC).
9 ITA.No.1302/Del./2020 M/s. Garima Polymers Pvt. Ltd., New Delhi. 5. On the other hand, the Ld. D.R. relied upon the Orders of the authorities below and submitted that assessee did not follow the Order of the Tribunal Dated 27.03.2017 and since parties did not appear before A.O, therefore, additions were rightly made against the assessee.
We have considered the rival submissions and perused the material available on record. The issue of share application money received and unsecured loans are decided as under.
SHARE APPLICATION MONEY :
The assessee has received Rs.3,50,000/- from Smt. Renu Rekhan and Rs.6 lacs from Smt. Nisha Rekhan on account of share application money. The assessee has filed their confirmation and copy of the ITR, but, in the confirmation it is not mentioned whether share application money have been given in cash or through Bank account. No evidence of their creditworthiness have been filed. Thus, assessee failed to prove the genuineness of the share application money received from these two ladies. In the 10 ITA.No.1302/Del./2020 M/s. Garima Polymers Pvt. Ltd., New Delhi. absence of adequate evidence, the authorities below were justified in making the addition. We, therefore, confirm the addition of Rs.9,50,000/- and dismiss this ground of appeal.
UNSECURED LOANS :
The assessee has received unsecured loans from 05 parties. The assessee in respect of the 05 creditors has filed their confirmations which clearly show that assessee has received loans from them through banking channel. The assessee has also filed copy of the ITR and bank statement of first 04 creditors except in cases of Star Technosoft Pvt. Ltd. It would show that these 04 creditors are assessed to tax and their bank accounts clearly show they have sufficient bank balance to give loan to the assessee. These creditors have also confirmed giving loan to the assessee. In the case of Star Technosoft Pvt. Ltd., assessee has filed letter before A.O. Dated 21.05.2018 [PB-124] in which assessee has explained that the assessee is making efforts to get the bank statements and in case of urgency the same
11 ITA.No.1302/Del./2020 M/s. Garima Polymers Pvt. Ltd., New Delhi. may be summoned from the concerned Bank of the creditors. The assessee also requested that this creditor may be summoned under section 131 of the Income Tax Act. However, the A.O. did not make any effort to summon this creditor for producing the bank statement and no effort is also made to call for the information from the concerned Bank of the creditor, despite the request made by the assessee. The Hon’ble Allahabad High Court in the case of Munnalal Muralidhar vs., CIT [1971] 79 ITR 540 (Alld.) held that “A.O. should assist the assessee by exercising power to enable the assessee to produce the evidences. Otherwise, the entire assessment order would vitiate”. Since the A.O. did not take any steps in the matter, therefore, no adverse inference could be drawn against the assessee in respect of the creditor Star Technosoft Pvt. Ltd. It may also be noted here that A.O. has found that income of the creditor is low as compared to the corresponding transaction, but, their bank statements clearly show they have sufficient means to give loan to the assessee and in case of two of the creditors even their income was higher as compared to the loan given
12 ITA.No.1302/Del./2020 M/s. Garima Polymers Pvt. Ltd., New Delhi. to the assessee. Merely because low income is shown in the return of income by the creditor is no ground to make any addition against the assessee. The Hon’ble Delhi High Court in the case of CIT vs., vs. Vrindavan Farms Pvt. Ltd., etc. ITA.No.71 of 2015 dated 12th August, 2015 (Del.), in which it was held as under :
“The sole basis for the Revenue to doubt their creditworthiness was the low income as reflected in their return of income. It was observed by the ITAT that the AO had not undertaken any investigation of the veracity of the documents submitted by the assessee, the departmental appeal was dismissed by the Hon’ble High Court.”
8.1. In the case of creditor Kshitiz Infratech Pvt. Ltd., the A.O. from the balance sheet found that amount of Rs.50 lakh have been shown as advance against the property, but, it is a fact that this creditor has given an amount of Rs.50 lakhs to the assessee, therefore, no further adverse inference could be taken against the assessee. The 13 ITA.No.1302/Del./2020 M/s. Garima Polymers Pvt. Ltd., New Delhi. authorities below have also rejected the explanation of assessee because the creditors did not appear in response to the summons issued by the A.O. Dated 17.05.2018 for the date fix for 24.05.2018. It may be noted that the A.O. issued summons under section 131 of the Income-Tax Act, 1961 to enforce the attendance of the creditors at the fag end of the assessment. The first date was fixed for 24.05.2018 only and assessment have been framed on 31.05.2018. Thus, the Learned Counsel for the Assessee rightly contended that no sufficient time was given to the creditors to appear before A.O. in response to the summons under section 131 of the Income Tax Act, 1961. Further no time have been given to the assessee to enforce the attendance of these creditors before A.O. The Hon’ble Delhi High Court in the case of Divine Leasing & Finance Ltd., 299 ITR 268, in which it was held as under :
“No adverse inference should be drawn if shareholders failed to respond to the notice by A.O.
14 ITA.No.1302/Del./2020 M/s. Garima Polymers Pvt. Ltd., New Delhi. 8.2. It is also well settled Law assessee need not to prove the source of the source. We rely upon the Judgment of the Hon’ble Delhi High Court in the case of (1) Dwarakadhish Investment P. Ltd., 330 ITR 298 (Del.) (HC) (2) Rohini Builders 256 ITR 360 (Guj.) (HC) and Zaffar Ahmed & Co., 30 taxmann.com 269 (All.). It may also be noted here that the ITAT restored the appeals of assessee to the file of Ld. CIT(A) for A.Ys. 2009-2010 and 2010-2011. In A.Y. 2010-2011 the same Ld. CIT(A) passed the Order on 06.07.2020 and on production of the sale deed found that creditworthiness of the creditor is established. It is held in this year that mere non-compliance of the summon is not sufficient to make the addition under section 68 of the Income Tax Act, 1961, where identity, genuineness and creditworthiness stands established. Thus, there was no reason for the Ld. CIT(A) to take a different view in assessment year under appeal i.e., 2009-2010. Considering the totality of the facts and circumstances, we are of the view that initial burden upon the assessee to prove identity of the creditors, their creditworthiness and genuineness of 15 ITA.No.1302/Del./2020 M/s. Garima Polymers Pvt. Ltd., New Delhi. the transaction have been discharged. The A.O. did not bring any evidence on record to disbelieve the explanation of the assessee or the documentary evidence filed on record. In view of the above, we set aside the Orders of the authorities below and delete the addition of Rs.1.50 crores on account of 05 creditors above. This ground of appeal is allowed. No other ground is argued. Appeal of the Assessee is partly allowed.