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Income Tax Appellate Tribunal, DELHI BENCH ‘B’ : NEW DELHI
Before: SHRI R.K. PANDA & SHRI KULDIP SINGH
PER KULDIP SINGH, JUDICIAL MEMBER :
Present cross appeals filed by the assessee as well as by the revenue are being disposed off by way of composite order to avoid repetition of discussion. referred to as the ‘assessee’) by filing the present appeal being sought to set aside the impugned order dated 14.03.2016 passed by the Commissioner of Income-tax (Appeals), Faridabad qua the assessment year 2011-12 on the grounds inter alia that :-
“1. That the Learned Commissioner of Income Tax (Appeals), Faridabad, has erred in law as well as on facts and in circumstances of the case in upholding the addition of Rs.45,00,000/- made by the Assessing Officer under section 68 without appreciating the fact that the appellant has fully discharged its onus by providing all the information so as to prove identity of the shareholders, genuineness of the transactions and credit worthiness of the shareholders.
That the Learned Commissioner of Income Tax (Appeals), Faridabad, has erred in law as well as on facts and in circumstances of the case in upholding addition under section 68 made by the Assessing Officer without considering the verdicts of various courts including Hon'ble Supreme Court in CIT Vs Lovely Exports 3. That the Learned Commissioner of Income Tax (Appeals), Faridabad, has erred in law as well as on facts and in circumstances of the case in upholding addition under section 68 without appreciating the material available on record.
That the Learned Commissioner of Income Tax (Appeals), Faridabad, has erred in law as well as on facts and in circumstances of the case in upholding addition under section 68 by relying on the decisions which are not applicable to the facts of the case.”
as the ‘Revenue’) by filing the present appeal being sought to set aside the impugned order dated 14.03.2016 passed by the Commissioner of Income-tax (Appeals), Faridabad qua the assessment year 2011-12 on the grounds inter alia that :-
“Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was right in deleting the disallowance of Rs.1,19,63,668/- which was made by the AO on account of unexplained expenditure by ignoring the facts that assessee himself admitted that he has not done any development work for PACL Ltd.” 4. Briefly stated the facts necessary for adjudication of the issues at hand raised in both the appeals are : The assessee is into the business of infrastructure development, real estate promotion and contractor-ship who have claimed returned income of RS.87,90,500/- and consequently assessment was framed at the income of Rs.2,52,54,170/- under section 143 (3) of the Income-tax Act, 1961 (for short ‘the Act’). Assessing Officer (AO) made addition of Rs.45,00,000/- on account of assessee’s undisclosed income for the previous year relevant to the year under assessment on the ground that share application and share premium money received by the assessee from the so-called investor company, namely, M/s. C.J. Exim Pvt. Ltd. and M/s. Mass Security Pvt. Ltd. bring on record requisite evidence to substantiate the claim qua receipt of share application money/share premium from aforesaid two companies by producing their Principal Officers.
AO also made addition of Rs.1,19,63,668/- on account of disallowance of unexplained expenditure qua the contract obtained from M/s. PACL Ltd. for development of 1507538 CUM of land @ Rs.199/- per CUM on the ground that the contract received by the assessee from M/s. PACL Ltd. has been further given to two parties, namely, M/s. Rajesh Projects India Pvt. Ltd. and M/s.
Gupta Infrastructure Ltd. for equivalent areas whereas before the Investigation Wing assessee deposed that it has given contract for development of land of 15,99,814 CUM of area for value of Rs.31,19,63,730/- to only one party i.e. M/s. Rajesh Projects India
Assessee carried the matter by way of an appeal before the ld. CIT (A) who has deleted the addition of Rs.1,19,63,668/- made by the AO on account of excessive expenditure, however confirmed the addition of Rs.45,00,000/- made by the AO on account of undisclosed income received from bogus share application and share premium money by partly allowing the have come up before the Tribunal by way of filing the present appeals.
We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
REVENUE’S APPEAL GROUND NO.1 8. The ld. DR for the Revenue challenging the impugned order passed by the ld. CIT (A) contended inter alia that ld. CIT (A) has ignored the admission made by Shri Deepak Nimesh, Director of the assessee company; that no work has been performed by the assessee company rather it was performed by a sub-contractor and as such, question of incurring expenses does not arise; that the ld. CIT (A) has not conducted any enquiry on the basis of statement of Shri Deepak Nimesh; that the ld. CIT (A) further contended that this issue be remanded back to the ld. CIT (A) to decide afresh and relied upon the decision rendered by Hon’ble Delhi High Court in CIT vs. M/s. Jansampark Advertising and Marketing (P) Ltd. in ITA 525/2014 order dated 11.03.2015. addressed by the ld. DR for the Revenue, ld. AR for the assessee contended inter alia that the AO has wrongly considered the figure of contract charges paid to M/s. Rajesh Projects India P. Ltd. in both the projects which were required to be considered in one project only; that the AO has made addition on the basis of incorrect facts and there is only mismatch in the accounting numbers and relied upon the order passed by the ld. CIT (A).
Undisputedly, assessee company has got contract from M/s.
PACL Ltd. for development of 1507538 CUM of land @ Rs.199
per CUM. It is also not in dispute that during the post-search enquiry, statement of Shri Deepak Nimesh, Director of assessee company was recorded by the DDIT, Investigation. It is also not in dispute that addition of Rs.1,19,63,668/- has been made by the AO on account of unexplained/excessive expenditure on failure of the assessee to furnish any explanation or evidence nor the books of account have been produced for verification.
In the backdrop of the facts and circumstances of the case, when we examine the impugned order, it has come on record that the ld. CIT (A) has deleted the addition by entertaining the additional evidence produced by the assessee company after calling ld. CIT (A) further shows that there is not even a whisper as to the statement of Shri Deepak Nimesh, Director of the assessee company recorded by the DDIT, Investigation during post search enquiries wherein he has admitted that the assessee company has not performed any contract work allowed by M/s. PACL Ltd. rather it was sub-contracted to M/s. Rajesh Projects India P. Ltd. and M/s. Gupta Infrastructure Ltd. for equivalent area. For ready perusal, operative part of the facts narrated by AO qua recording of statement of Shri Deepak Nimesh as to the categoric admission is extracted as under :-
In this case information was received from “ Investigation Wing, Gurgaon that during the course of search and survey proceedings on M/s PACL evidences have been found with reference to booking of bogus expenses by M/s PACL through contractors for land development work. The DDIT (Inv.) has informed that during the course of post search enquiries the statement of Shri Deepak Nimesh, Director of the assessee company was recorded wherein Sh. Deepak Nimesh informed that they have received contract for agricultural land development for an amount of f 30 crores with PACL Limited. It was admitted that no agricultural land development work was actually done by them and that some agent approached them and offered a margin of around 1 %, has made available agreements for contract and sub contract. The said agent got those agreement signed from both the parties. That agent managed all the paper work related to those contracts. It was admitted that they have never met any representative of PACL Limited and he cannot confirm whether any actual work had been done related to agricultural land development for PACL Ltd. It was further admitted that they do not have details of the agricultural ./2016 ITA No.2787/Del./2016 land to be developed for PACL Ltd. During the statement Sh. Deepak Nimesh was asked to explain the discrepancy that the company has been awarded a contract for developing agricultural land on 01.10.2010 for an area of 15,07,538 CUM for Rs.30 crores how it is possible to award further a sub contract for an area which is much more than you have been awarded i.e. 15,99,814 CUM for a value of Rs.31,19,63,730/-. On being confronted that in the assessment proceedings the assessee has claimed to have received contract for 1507538 CUM and given contract to two parties i.e. M/s Rajesh Projects India P. Ltd and to M/s Gupta Power Infrastructure Ltd for equivalent area whereas in the Investigation Wing, the assessee has deposed that it has given contract for development of land of 15,99,814 CUM of area for a value of Rs.31,19,63,730/- to only one party i.e. M/s Rajesh Projects India P. Ltd. The assessee reiterated its earlier stand vide letter dated 28.03.2014 yet no concrete evidence in support of its contention has been submitted to authenticate its claim.”
From the enquiry conducted by DDIT, Investigation, Faridabad, u/s 131 of the Act, available at page 82 of the paper book, it is proved that assessee has failed to record his remaining statement before DDIT despite given repeated telephonic calls which was stopped temporarily at his request on 19.11.2013 at 11.00 AM but explained the admission made by Shri Deepak Nimesh as to sub-contracting the agricultural land development work to M/s. Rajesh Projects India P. Ltd. and M/s. Gupta Infrastructure Ltd., these facts show that the assessee has intentionally suppressed the material facts rather based his entire (A) has lost sight off of all these facts and has not preferred to conduct any enquiry.
We are of the considered view that when Shri Deepak Nimesh, Director of the assessee company has categorically admitted the fact before DDIT, Investigation that the assessee company has sub-contracted agricultural and development work of Rs.30 crores allotted by M/s. PACL Ltd. to M/s. Rajesh Projects India P. Ltd. and M/s. Gupta Infrastructure Ltd. for equivalent area, the ld. CIT (A) was required to make a discreet enquiry into the veracity and implication of the statement of Shri Deepak Nimesh qua addition of Rs.1,19,63,668/-. Without categoric finding by the ld. CIT (A) on this issue, the deletion made by the ld. CIT (A) cannot be upheld. So, we are of the considered view that the order of ld. CIT (A) deleting the addition of Rs.1,19,63,668/- is liable to be set aside to decide afresh by making discreet enquiry into the statement made by Shri Deepak Nimesh recorded by DDIT, Investigation by providing adequate opportunity of being heard to the assessee. So, ground no.1 is determined in favour of the Revenue for statistical purposes.
GROUND NO.1, 2, 3 & 4
Undisputedly, the assessee company has raised share capital to the tune of Rs.95,00,000/- during the year under assessment detailed as under :-
Sl.No. Name and address of PAN Total the shareholder amount received Rs. 1 Deepak Nimesh ACYPN4733B 30,00,000 2 Renu Nimesh ADRPN5294K 20,00,000 3 C.J. Exim Pvt. Ltd. AACCC1609E 30,00,000 4 Mass Securities Pvt. AAECM6987B 15,00,000 Ltd. TOTAL 95,00,000
Undisputedly, AO has accepted share capital raised from Shri Deepak Nimesh and Renu Nimesh to the tune of Rs.50,00,000/- but made addition of Rs.45,00,000/- on account of capital raised from C.J. Exim Pvt. Ltd. and Mass Securities Pvt. Ltd. i.e. Rs.30,00,000/- and Rs.15,00,000/- respectively on the ground that assessee has failed to file requisite evidence to substantiate its claim because summon sent to M/s. C.J. Exim Pvt. Ltd. and Mass Securities Pvt. Ltd. received back unserved from notice server with the report that no such company exists at the given address nor the address of these companies could be located on local enquiries. made by the AO and confirmed by the ld. CIT (A) contended inter alia that during the assessment proceedings, assessee company has filed complete details viz. PAN, copy of income-tax return, audited balance sheet, bank statement, confirmation statement in respect of all the shareholders, but the AO has made self-contradictory findings which are vague and ambiguous; that return of summon issued to the said companies cannot be the sole factor to invoke section 68 of the Act and relied upon the decision rendered by Hon’ble Apex Court in case of CIT vs. Orissa Corporation Pvt. Ltd. (1986) 52 CTR (SC) 138; that during the appellate proceedings, assessee has filed profile of the companies, copy of income-tax return, copy of audited financial statements, copy of bank statements and confirmation from shareholders qua both the companies; that the assessee company has discharged its onus by proving identity, creditworthiness and genuineness of the aforesaid two companies; that the ld. CIT (A) has confirmed the addition on the basis of surmises and relied upon the decision rendered by Hon’ble Apex Court in case of CIT vs. Lovely Exports Pvt. Ltd. 315 ITR 5 and also relied upon the decisions in CIT Vs Dolphin Canpack Ltd. [283 ITR 190], CIT Vs Winstral Petrochemicals Pvt 227] , CIT Vs Dataware Pvt Ltd., Umbrella Projects Pvt. Ltd. Vs ITO (ITA No. 5955-Del-2014, date of order 23.02.2018) and Moti Adhesive Pvt. Ltd. vs ITO (ITA No. 3133-Del-2018, date of order 25.06.2018).
However, on the other hand, ld. DR for the Revenue to repel the arguments addressed by the ld. AR for the assessee contended inter alia that when the assessee has failed to prove the existence of M/s. C.J. Exim Pvt. Ltd. and Mass Securities Pvt. Ltd. reported to be not existing at the given address, the question of their genuineness and creditworthiness does not arise; that assessee has also failed to produce Directors of the said companies despite availing numerous opportunities; that merely completing the paper work does not prove the genuineness of the transaction; that from the bank statement of M/s. C.J. Exim Pvt. Ltd., it is noticed that this company has made payment of Rs.30,00,000/- by RTGS on 21.02.2011 to the assessee company as share capital; that M/s. C.J.
Exim Pvt. Ltd. received funds of Rs.30,00,000/- on transfer from different accounts on 21.02.2011 itself which is nothing but circulation of assessee’s own money which proved that the entire and confirmed by the ld. CIT (A).
Perusal of the impugned order passed by the ld. CIT (A) particularly para nos.21, 22 & 23 go to prove that a detailed enquiry has been conducted by the ld. CIT (A) which proves inter alia that M/s. C.J. Exim Pvt. Ltd. which alleged to have invested an amount of Rs.30,00,000/- in the share capital in the assessee’s company and has maintained its account with Dena Bank, Faridabad; that from the bank statement perused by the ld. CIT (A), extracted at pages 16 to 19 of the impugned order, it is proved that though M/s. C.J. Exim Pvt. Ltd. has transferred the amount of Rs.30,00,000/- to the assessee company through RTGS on 21.02.2011 but further enquiry revealed that M/s. C.J. Exim Pvt. Ltd. has received Rs.30,00,000/- on 21.02.2011 itself by way of five different entities in whose account cash amount of Rs.30,00,000/- was deposited on 21.02.2011 itself; that when the assessee has confronted with all these facts by the dl. CIT (A) on 07.03.2016 no explanation has been furnished; that it has also come on record that all five cheques issued by different persons/ entities in favour of M/s. C.J. Exim Pvt. Ltd. were in the same handwriting; that when the notice was issued to M/s. C.J. Exim same was returned back with the report that no such companies/ entities are in existence at the given address; that the assessee company despite availing numerous opportunities has failed to produce principal Officer of M/s. C.J. Exim Pvt. Ltd. and Mass Securities Pvt. Ltd. before the AO to record their statements; that premium of Rs.40 per share has been paid on the share of Rs.10 per share by the assessee company which is a 10 year old company only.
The contention of the ld. AR for the assessee that the assessee company is not supposed to prove the source of source who has duly proved genuineness, identity and creditworthiness of the investor company is not tenable because except the smart paper work there is not an iota of evidence appealing the ordinary human mind that the companies which are having no physical existence have invested huge amount with the assessee company who have received money by way of cheques from five persons, in whose account cash deposit was made of the equivalent amount a day prior to issuance of the cheque.
So far as addition of Rs.30,00,000/- by M/s. C.J. Exim Pvt. Ltd. is concerned, we are of the considered view that deposit of money/premium with the assessee company is nothing but a round tripping of assessee’s own money because physical existence of M/s. C.J. Exim Pvt. Ltd. has not been proved nor Director/Principal Officer of company has been produced before the AO which leads to the conclusion that the transaction is bogus.
Identical issue has been decided by Hon’ble Apex Court against the assessee in CIT vs. NRA Iron and Steel (P.) Ltd. (2019) 412 ITR 161 (SC) case by returning following findings :-
“Held, allowing the appeal, that the Assessing Officer had conducted detailed enquiry which revealed that (i) there was no material on record to prove, or even remotely suggest, that the share application money was received from independent legal entities. The survey revealed that some of the investor companies were non-existent, and had no office at the address mentioned by the assessee. The genuineness of the transaction was found to be completely doubtful. (ii) The enquiries revealed that the investor companies had filed returns for a negligible taxable income, which would show that the investors did not have the financial capacity to invest funds ranging between Rs. 90,00,000 to Rs. 95,00,000 in the assessment year 2009-10, for purchase of shares at such a high premium. (iii) There was no explanation whatsoever offered as to why the investor companies had applied for shares of the assessee at a high premium of Rs. 190 per share, even though the face value of the share was Rs. 10 per share. (iv) Furthermore, none of the so-called investor companies established the source of funds from which the high share premium was invested. (v) The mere mention of the income-tax file number of an investor was not sufficient to discharge the onus under section 68 of the Act. The appellate authorities had ignored the detailed findings of the Assessing Officer from the field enquiry and investigations carried out by his office and erroneously held that merely because the assessee had filed all the primary evidence, the onus on the assessee stood discharged. The investor companies which had filed income-tax returns with a meagre or nil income had to explain how they had invested such huge sums of money in the assessee. Clearly the ./2016 ITA No.2787/Del./2016 onus to establish the creditworthiness of the investor companies was not discharged. The entire transaction seemed bogus, and lacked credibility. The field enquiry conducted by the Assessing Officer revealed that in several cases the investor companies were found to be non-existent, and the onus to establish the identity of the investor companies, was not discharged by the assessee. On the facts, the Assessing Officer was justified in adding back the amounts to the assessee's income.”
So, in these circumstances, we have no option except to uphold the order passed by the ld. CIT (A) who has rightly confirmed the addition qua share application/ share premium of Rs.30,00,000/- in case of M/s. C.J. Exim Pvt. Ltd.
However, so far as addition made by the AO and confirmed by ld. CIT (A) qua amount of Rs.15,00,000/- invested by Mass Securities Pvt. Ltd. is concerned, the ld. CIT (A) has not discussed any evidence by conducting the enquiry rather confirmed the addition made by the AO merely by applying the evidence available on record in case of M/s. C.J. Exim Pvt. Ltd. In other words, the ld. CIT (A) has not decided the issue as to confirming the addition of Rs.15,00,000/- invested by Mass Securities Pvt. Ltd. by passing a speaking order. Case laws relied upon by the assessee are not applicable to the facts and circumstances of the case. So, in these circumstances, this issue is set aside to the file of ld. CIT (A) to decide afresh by providing adequate opportunity of 17 ITA No.2262/Del./2016 ITA No.2787/Del./2016 being heard to the assessee. So, grounds no.1, 2, 3 & 4 are partly determined in favour of the assessee for statistical purposes. 24. Resultantly, the appeal filed by the Revenue in is also partly allowed for statistical purposes. Order pronounced in open court on this 29th day of July, 2019.