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Income Tax Appellate Tribunal, DELHI BENCH ‘B’, NEW DELHI
Before: SH.SUDHANSHU SRIVASTAVA & SH. PRASHANT MAHARISHI
PER PRASHANT MAHARISHI, AM: 1. These are the bunch of cross appeals of Four assesses involving similar grounds and issues in this appeal. Therefore, those are heard together and disposed of by this common order. First we state the grounds of appeal and statements of facts in case of Fusion Conbuild Private Limited in /del/2016 filed by assessee for AY 2011-12 . Thereafter the decision in these appeals are applied to the appeals of other assesses involved in this bunch of appeals.
del/2016 is filed by the ACIT, New Delhi (AO) against the order of the ld CIT (A)-25, New Delhi dated 31.12.2015 for Assessment Year 2011-12. 3. The revenue has raised the following grounds of appeal:- “1. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the addition u/s 68 made on account of unexplained share capital received from 9 persons [ excluding the two directors] amounting to Rs. 92500000/- - without appreciating the fact that neither the creditworthiness of these creditors nor the genuineness of transactions were established as submitted by the AO in Assessment Order and Remand Report.
2. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in holding that the onus of the assessee is discharged without appreciating the judgement of the jurisdictional High Court given in case of CIT v. Nova Promoters (2012) 342 ITR 169 (Delhi) wherein the Hon’ble Court has held that by merely filing confirmations, ITRs etc. the identity, creditworthiness and genuineness of transaction are not established and the evidences adduced by the assessee has to be examined not superficially but in depth and having regard to the test of human probabilities and normal course of human conduct.
3. That on the facts and in circumstances of the case, the Ld. CIT(A) erred in holding that the no proper enquiry was conducted without appreciating the fact that powers of the first appellate authority are co-terminus, with those of the AO, and he has not only the jurisdiction but also duty to conduct relevant inquiries wherever required as held by the Hon’ble Courts including the jurisdictional High Court in case of Commissioner of Income-tax-II v. Jansampark Advertising & Marketing (P.) Ltd [2015] 56 taxmann.com 286 (Delhi).
4. That on the facts and circumsatnecs of the casez, the ld CIT (A) failed to appreciate that Shri Mukeshkumar , director hasd admitted in the statement recorded u/s 131 dated 6/7/2011 that the amount received in the three group comapni M/s Fusion Conbuild Pvt Ltd , M/s Duxton Hill Builders Pvt Ltd & Frugal developers Pvt Ltd including the assessee company , were actually booking advances received by above three companies on behalf of paramount Residency pvt Ltd which is a grop concern.
5. That the order of the CIT(A) is perverse, erroneous and is not tenable on facts and in law.
That the grounds of appeal
are without prejudice to each other.
7. That the appellant craves leave to add, amend, alter or forgo any ground(s) of appeal either before or at the time of hearing of the appeal.”
The assessee has raised the following grounds of appeal in for the Assessment Year 2011-12. “1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in assuming jurisdiction to assess the appellant u/s 153 A. of the Act.
2. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on' facts in confirming the action of Ld. AO in framing the impugned assessment order u/s 143(3)/153A without issuing and serving the jurisdictional notice u/s 143(2) of the Act.
3. That having regard to the facts and circumstances of the case, Ld. C1T(A) has erred in law and on facts in confirming the addition to the extent of Rs.8,27,00,000/- out of total share capital of Rs. 18,72,00,00/-
4. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the addition to the extent of Rs.8,27,00,000/- being the amount of share capital by treating it as alleged unexplained cash credit u/s 68 is bad in law and against the facts and circumstances of the case, more so when there was no incriminating material was found during the course of search and more so when the impugned year was the first year of the assessee company.
5. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the addition to the extent of Rs.8,27,00,000/- made by Ld. AO without observing the principles of natural justice.
6. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest u/s 234A, 234B and 234C of Income tax Act, 1961.
5. Brief facts of the case shows that the assessee is a company engaged in residential and commercial project development in Uttar Pradesh who filed its return of income at Rs. Nil. A search and seizure u/s 132 of the Act in M/s. Paramount, Gulshan & Ajnara Group of cases was carried out on 11.03.2011, where the case of the assessee was also covered. During the course of assessment it was found that assessee has received share application money of Rs. 18,73,74,593/- from several persons. Statement of company secretary was recorded who was ignorant about the same. Based on search, enquiries were carried out in respect of various share applicants and it was found that share applicants were not available at the given addresses. Even the summons by the Investigation Wing could not be served. Statement u/s 131 was also recorded on 06.07.2011 of Director of the group wherein, the question with respect to share application money was asked. The director gave certain answers, which were not proving the genuineness of the same. Further, the ld AO issued summons u/s 131 to Delhi based share applicants and query letter issued u/s 133(6) to the outstation share applicants i.e Kolkata based companies. Summonses were received back unserved. However, from various Kolkata based companies the information was received in dak in response to notice u/s 133 (6) of the act. The ld AO analyzed the information and found that most of the companies have meager income or have returned losses. Therefore, the ld AO asked the assessee to produce the share applicants’ directors who were not produced. Therefore, after considering the various judicial pronouncements the ld AO made the addition of Rs. 18.72 crores in the hands of the assessee u/s 68 of the Act vide order dated 28.03.2013.
6. The assessee preferred appeal before the ld CIT (A) who deleted the addition. However, before him in the remand report it was stated by the ld AO that money was transfer through Rajesh Kumar Aggarwal an accommodation entry operator and Mr. Santosh Mehta. The ld CIT (A) noted that Rs. 8.27 crores received form 22 Kolkata based share investors where the adverse information is available therefore he confirmed this addition. Further Rs. 10.45 crores received from other share investors [other than Kolkata companies] was complying with the requirement of section 68 of the Act. Hence, he deleted the same. The revenue is aggrieved with that order and has preferred an appeal before us. Assessee is in appeal contesting the order where the addition of Rs 82700000/- received from Kolkata companies is confirmed by him.
7. The ld DR vehemently submitted that neither the creditworthiness with respect to the shareholder was proved and nor the genuineness of the transaction was proved. It was further stated that despite repeated reminders the assessee could not produce the share applicants. Further, the ld CIT (A) deleted the addition without examining the shareholders. Therefore, the order of the ld CIT (A) suffers from serious infirmities in deleting the addition of non-Kolkata companies.
With respect to Kolkata companies, he defended the order of the ld CIT (A). he submitted that the ld CIT (A) should have applied the same criteria for those non-Kolkata based companies also.
The ld AR vehemently supported the orders of the ld CIT (A) in case of non-Kolkata companies and stated that when the assessee has discharged its initial onus, the ld CIT (A) has correctly deleted the addition. With respect to Kolkata companies where the addition is confirmed, he submitted that on the same criteria where the ld CIT (A) has deleted the addition in case of non-Kolkata companies, the ld CIT (A) should have deleted the addition.
We have carefully considered the rival contentions and perused the orders of the lower authorities. The facts of the case have already been stated in earlier paragraphs. The revenue is aggrieved with the order of the ld CIT (A) wherein, unexplained share capital received from 9 persons amounting to Rs. 9.25 crores stating that neither the creditworthiness of these creditors nor the genuineness of the transactions was established as held by the ld AO in the assessment order and in the remand report, the ld CIT (A) has deleted the addition. The revenue is also aggrieved with the order of the ld CIT(A) who did not appreciate that Shri Mukesh Kumar Aggarwal, Director of the company has admitted in the statement recorded u/s 131 of the Act on 06.07.2011 that the three group companies namely M/s. Fushion Conbuild Pvt. Ltd, M/s. Duston Hills Builders Pvt Ltd and M/s. Frugal Developers Pvt. Ltd and the assessee company were actually received booking advance by the company on behalf of the M/s. Paramount Residency Pvt. Ltd. It was further stated by the revenue that the assessee has failed to produce the directors of the shareholders despite their being a serious allegations by the ld AO and further the ld CIT (A) has deleted the additions partially without examining those directors. It is apparent that assessee company infact had issued share capital worth Rs. 187374593/- to 33 parties. The ld AO made the addition of Rs. 18,72,00,000/- u/s 68 of the Act. From 22 companies which are based in Kolkata and against whom necessary enquiries were conducted by the Investigation Wing were found to be paper companies having no actual business and created exclusively for providing accommodation entries to various beneficiaries. Shri Rajesh Kumar Aggarwal mentioned as the main persons providing accommodation entries along with financial broker Mr. Santosh Mehta. The ld AO asked the assessee to produce the directors to shows that the identity of the companies and their creditworthiness and genuineness of the investment by them in the assessee company. However, as noted in para NO. 8.11 by the ld CIT (A) that reasonable time was not given to the assessee. Further, the appellant also stated before the ld CIT (A) that if the opportunity is given then they can produce the shareholders. The ld CIT (A) has also noted that the assessee was asked to produce the shareholders only at the fag end of the assessment proceedings. The ld CIT (A) has deleted the addition based on this submission with respect to Non Kolkata assessee holding that assessee has discharged its onus. He confirmed the addition of Kolkata companies as per para No. 8.16 of his order against which the assessee is in appeal.
With respect to additions deleted by the ld CIT (A) of Rs. 10,45,00,000/- included a investment of Rs. 88 lakhs, 32 lakhs and Rs. 60 lakhs by the Director of the company, which has not been added by the ld AO. However, the ld AO made additions of the entire share application money therefore; there is an anomaly in the order of the ld AO. With respect to the non Kolkata based companies the ld CIT (A) noted that during the remand proceedings the ld AO issued summons u/s 131 of the Act to M/s. Sunshine Infra Corporation Ltd but he also noted that there was a compliance by that company and only issue was with respect to the fact that the director has not appeared. The ld CIT (A) has deleted the addition merely for the reason that the ld AO did not specify which director is to be presented. In case of M/s. Sunshine Infrabuild Pvt. Ltd at the Page No. 87 of the order of ld CIT(A) the assessee produced ‘supervisor” of that company and his statement was recorded, the ld CIT (A) deleted the addition on the statement of supervisor. We failed to appreciate that how the ld CIT (A) deleted the addition based on the statement of the supervisor who is not aware about the creditworthiness or genuineness of the transaction. We also failed to understand that when the directors were required to be produced, how the authorised representative could be produced in lieu of those directors. The ld CIT (A) according to us has grossly erred in accepting the statement of authorised representative. He has also merely gone by the judicial precedents without looking at the fact that all these company who have invested with the assessee does not have adequate source of income as they are showing meager income. Those companies do not have any interest of any appreciation in the share value of the Assessee Company as well as receipt of any dividend from the assessee company. Further, even the assessment status of the assessee and magnitude of income shown by the assessee also does not inspire any credence that a company having a nil return can generate the share capital of Rs. 18.72 crores from unknown companies. How the assessee or its directors came into contact with these companies, is a moot question to decide about the genuineness of the whole transaction. Further, the assessee is a private limited company how it approached so many of the subscribers in different geographical locations and how they were convinced and on what conviction they invest in assessee company of such huge magnitude. However, as the ld AO has made the addition apart from other things the fact that despite repeated opportunities the assessee has failed to produce the directors of investor companies. The ld CIT (A) deleted the whole addition of non-Kolkata based companies even on the statement of the supervisor. Further, the assessee was asked to produce the directors of those companies at the fag end of the assessment proceedings. We failed to understand how the ld CIT (A) has deleted the addition of non-Kolkata based entities without examining the directors. He also did not exercise his own powers of inquiry.
Thus on an enquiry by the bench, whether the assessee would be willing to produce the directors of those companies for the examination of the ld AO, it was readily agreed. The ld CIT DR also agreed that without examination of those directors clearing suspicion about their creditworthiness and genuineness of the transaction the addition could not be deleted.
In view of the commitment of both the parties stated above, we set aside the appeal of the revenue as well as of the assessee back to the file of the ld AO with a direction to the assessee to prove the identity, creditworthiness of those depositors as well as genuineness of the whole transactions. The assessee is specifically directed to produce directors of the companies who are investors in the assessee company before the ld AO within four months from the date of this order. The ld AO may examine the details produced by the assessee and examine the directors of all the companies to test identity, creditworthiness of their investment as well as genuineness of the transactions. Assessee may substantiate its claim by producing any further evidences, which it could not produce before ld AO due to the opportunity at the fag end of the assessment proceedings; the ld AO may also conduct any such inquiry, which is required to be carried out by him. After that, ld AO may decide the issue of applicability of section 68 of the act on these appeals afresh in accordance with law.
Thus, the order of the ld CIT (A) is set aside and appeals of both the parties are allowed for statistical purposes.
Now we come to the appeal of Duxton Hills Builders Pvt Ltd wherein on the identical facts and circumstances the assessee has received a replication money of ₹ 32.73 crores from 44 persons which was added by the learned assessing officer under section 68 of the act on total income declared by the assessee of loss of rupees for 62979/– was assessed at ₹ 3 18204021/–. The learned CIT – A found that 22 companies are based out of Kolkata and their investment is ₹ 8.48 crores, he confirmed the addition. With respect to the balance addition made by the learned assessing officer, he deleted the same based on the same reason given in case of Fusion Conbuild Pvt Ltd. . Therefore, both the parties are in appeal before us. Assessee has preferred the appeal in ITA number 69/del/2016 whereas the revenue has filed appeal in ITA number 1394/del/2016.
Both the parties confirmed that the facts are identical to the issue decided in case of fusion Conbuild private limited, their arguments are also similar and their assurance of producing the shareholder of the investor companies stands. Therefore, for the similar reasons given in the appeals of both the parties in case of fusion Conbuild private limited, we set aside the appeal of the revenue as well as the assessee to the file of the learned assessing officer with similar direction as given therein to the file of the learned assessing officer. 17. Accordingly, reversing the order of the learned CIT – A, the appeal of the assessee as well as of the revenue are allowed for statistical purposes. 18. Now we come to the appeal of paramount propepbuild private limited in ITA number 637/del/2016 and appeal of the revenue in ITA number 1391/del/2016 for assessment year 2005 – 06 against the order of the learned CIT – A dated 31 December 2015. 19. Both the parties confirmed the facts in the present case are identical to the facts decided in the case of fusion Conbuild P ltd . It is stated that assessee has issued a share capital of ₹ 2 8950000 from 28 different entities. The learned assessing officer for the similar reasons made the addition under section 68 and the total income declared of ₹ 2 67220 was assessed at ₹ 2 9217220/–. On appeal before the learned CIT – AB addition was retained to the extent of only ₹ 40 lakhs and the balance addition was deleted. Therefore, both the parties are in appeal.
Both the parties confirmed that the facts are identical to the issue decided in case of fusion Conbuild private limited, their arguments are also similar and their assurance of producing the shareholder of the investor companies stands. Therefore, for the similar reasons given in the appeals of both the parties in case of fusion Conbuild private limited, we set aside the appeal of the revenue as well as the assessee to the file of the learned assessing officer with similar direction as given therein to the file of the learned assessing officer.
Accordingly, reversing the order of the learned CIT – A, the appeal of the assessee as well as of the revenue are allowed for statistical purposes.
Now we come to the appeal of assessing officer in Mount Echo buildable private limited for assessment year 2006 – 07 in ITA number 1397/del/2016 and cross objection of the assessee in 175/del/2016.
The facts in the case shows that the learned assessing officer noted during the course of assessment proceeding that assessee has issued share capital of ₹ 2 0200000/– to 24 entities. He made addition under section 68 of the income tax act of the above sum and the total income of the assessee at ₹ 2 0311010 August the returned income of ₹ 1 11010/–. The assessee preferred an appeal before the learned CIT – A who deleted the addition under section 68 of the above sum and therefore revenue is in appeal before us. The cross objection of the assessee is with respect to non-issue of notice under section 143 (two) of the income tax act in return filed in response to notice under section 153A of the act.
Both the parties confirmed that the facts are identical to the issue decided in case of fusion Conbuild private limited, their arguments are also similar and their assurance of producing the shareholder of the investor companies stands. Therefore, for the similar reasons given in the appeals of both the parties in case of fusion Conbuild private limited, we set aside the appeal of the revenue as well as the assessee to the file of the learned assessing officer with similar direction as given therein to the file of the learned assessing officer.
Accordingly, reversing the order of the learned CIT – A, the appeal of the revenue is allowed for statistical purposes.
The cross objection of the assessee was not pressed and hence dismissed.
In all the above appeals, no further issues were pressed and therefore in all these appeals all other grounds are dismissed.
Accordingly, all the appeals of the revenue in all these assessee is are allowed for statistical purposes, all the appeals of the assessee are allowed for statistical purposes and solitary cross objection filed by the assessee is dismissed. Order pronounced in open court on 05/02/2020.