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Before: Shri H.S. Sidhu & Shri O.P. Kant
ORDER Per O.P. Kant, A.M.: This appeal by the assessee is directed against order dated 10/09/2018 passed by the Ld. Commissioner of Income-tax (Appeals)-9, New Delhi [in short the Ld. CIT(A)] for assessment year 2013-14 raising following grounds:
“1. That the Ld. A.O. erred on facts and in law in issuing/sending notices dated 04/03/2016 u/s. 133(6) of I.T. Act on wrong addresses to various share subscribers thereby violating the principles of natural justice. 2. That the Ld. A.O. erred on facts and in law in not confronting the Appellant that notices u/s. 133(6) of I.T. Act had been issued/sent to various share subscribers which had been returned back undelivered thereby violating the principles of natural justice.
That the Ld. A.O. erred on facts and in law in confirming the addition of Rs.12,64,35,000 u/s. 68 of I.T. Act by completely ignoring the documentary evidence filed to prove the identity, genuineness and creditworthiness of various share subscribers. At any rate, the addition as made is very excessive.
4. The ld. CIT(A) has erred in making various observations which are factually incorrect particularly that the Appellant had filed additional evidence alongwith application under Rule 46A of I.T. Rules, whereas no additional evidence was filed before the Ld. CIT(A). 5. That the total income assessed at Rs.11,87,56,430 and the income-tax demand of Rs.3,85,48,402/- as worked out and interest thereon of Rs.1,38,37,608/- u/s. 234B aggregating to Rs.5,23,86,010/- is illegal. 6. That the Appellant reserves its right to add, amend/modify the grounds of appeal
.”
2. Briefly stated, facts of the case are that the assessee company is engaged in the business of running hotel under the name and style of “ Park ascent” at Noida (UP). For the year under consideration, the assessee filed return of income on 30/09/2013 declaring loss of Rs.76,78,838/-. In the scrutiny assessment completed on 20/04/2016 under section 143(3) of the Income Tax Act, 1961 (in short the Act), the Assessing Officer made addition mainly for the share application money received of Rs.12,64,35,000/-by the assessee in the year under consideration as unexplained cash credit under section 68 of the Act. On further appeal by the assessee, the ld. CIT(A) upheld the addition.
Aggrieved with the order of ld. CIT(A), assessee is in appeal before the Tribunal, raising the grounds as reproduced above.
3. In the grounds raised, the assessee has challenged the addition of Rs.12,64,35,000/-made by the Assessing Officer and upheld by the Ld.CIT(A). In ground No. 1 & 2, the assessee has raised the issue of violation of the principle of the natural justice, inter alia that notices under section 133(6) were issued by the Assessing Officer at the wrong address to various share subscribers, which had returned back undelivered. In ground No. 3, the assessee has raised that the ld. CIT(A) has upheld the addition ignoring the documentary evidences filed. In ground No. 4, the assessee has raised that the ld. CIT(A) has given factually incorrect finding regarding additional evidence filed under Rule 46A of Income Tax Rules, 1962. The ground No. 5 is raised in relation to income tax demand and interest consequent to the addition sustained.
The brief facts qua the issue in dispute are that during the year under consideration, the assessee received share application money from following persons:
Name of Applicants Amount received CCL International Limited 4,70,75,000 Tanvi Fincap Pvt Ltd 20,00,000
Lokesh Chand 34,75,000 Sarika Goel 61,10,000 Saurabh Goel 1,24,20,000 Saurabh Goel HUF 5,00,000 Suresh Chand 18,50,000 Manju Rani 36,05,000 Gyanindra Singh 3,50,000 JG International 25,00,000
Shipra Daga 3,00,000 Vatsal Liquors & Beverages Pvt Ltd 2,55,00,000 Amarjeet Singh 87,50,000 Amarjeet Singh HUF 60,00,000 Rajindra Arora 60,00,000
Total 12,64,35,000 4.1 The Assessing Officer called for documentary evidences to prove the identity and creditworthiness of the persons and genuineness of the transaction. The information filed by the assessee vide letter dated 28/12/2015 and 27/01/2016 was not found to be incomplete by the Assessing Officer and therefore he issued a letter dated 19/02/2016 indicating the deficiency of documents in respect of each share subscriber. The Assessing Officer also asked the assessee to produce all the share subscribers before him. The further information filed by the assessee was also not found sufficient by the Assessing Officer to establish identity & creditworthiness of the parties and genuineness of the transaction. The Assessing Officer issued notices under section 133(6) of the Act to few parties for verifying genuineness of the transaction, but in case of M/s. CCL International Ltd and Suresh Chand, the notices remained undelivered and in case of Tanvi Fincap P Ltd, Gynindrasingh, JG International , the notices were delivered but replies were not received. The ld. Assessing Officer observed that no one appeared before him except one party namely Sh. Suarabh Goel . The Ld. Assessing Officer made following conclusions as under: a. All the persons has failed to appear before this office to prove their identity except Mr. Surabh Goel. b. Notice u/s. 133(6) has been returned back undelivered creates doubt about the genuinity of the parties. c. No response has been received where notices u/s. 133(6) has been delivered till date of this order. d. Non submission of complete documents by assessee also creates doubt about the genuineness of the transaction and creditworthiness of the parties.” In view of the conclusions and various decisions relied upon, the ld. Assessing Officer made addition of the entire share application money of Rs.12,64,35,000 as unexplained cash credit under section 68 of the Act.
4.2. The ld. CIT(A) has recorded that the assessee filed certain additional evidences along with application under section Rule 46A of Income Tax Rules, 1962, which the ld. CIT(A) rejected. The Ld. CIT(A) analysed the documents which were filed by the assessee before the Assessing Officer and upheld the finding of the Assessing Officer observing as under:
“5.5 Apart from written submission, the appellant has also produced copies of documents produced before AO as mentioned above in appellant’s submission. I have examined these documents. Instead of supporting the case of appellant, these documents only reinforces the findings of the AO which are based on his detailed and wide analysis of the facts and circumstances of the case and is in congruence with the detailed set of observations and factors pointed out by the investigation wing. It is observed that the appellant has not been able to provide any evidence or document to prove the observations of the Assessing officer to be wrong. Except by scribbling over the similar set of documents, the appellant has nowhere been able to answer or clarify any of the observation levelled by the appellant. Therefore, it can be easily construed that the share application to the appellant company, as obvious from the indepth analysis provided by the assessing officer, are merely sham and bogus transactions, with an intent to mask the actual face of the amount received via the mode of share application money. 5.6. Against the above background where the AO has demonstrated that the third party documents furnished by the appellant produced a picture which is otherwise that of the appellant, the non submission of complete documents, as well as the non service/replies of the notices, truly refelect that the actual nature of the transaction appear to be a camouflage over the real nature reflected by the appellant. Hence, a heavier onus is cast on the appellant to prove the genuineness of such transactions, identity and credit worthiness of such share applicants, by adducing evidences and giving explanations, which are capable of proving beyond any doubt that its transactions of share money are distinctly genuine. Appellant’s insistence on the genuineness of transactions based on such minimal documents, fails to mitigate the severities of pointed out by the assessing officer and the corresponding inferences drawn from the documents presented by the appellant. Evidences as well as detailed analysis of all the parameters of the share applicant concerns clearly lay out the lack of genuineness in the transactions, as well as the identity and the credit worthiness of applicant. The appellant, even during the appellate proceeding, has failed to explain such transactions. Most importantly, the very fact that one of the applicant, in his statement, has presented facts, that is otherwise false vis a vis the books of accounts of the appellant, goes on in depth to prove that the applicant had simply cooked up an entry, to hide the actual nature of transaction.”
Before us, the Ld. counsel of the assessee filed a paper-book containing pages 1 to 566 and submitted that the Assessing Officer had not issued notice under section 133(6) of the Act in case of all the parties and whatever notices issued were at wrong address resulting into non-delivery. According to him, the assessee has not been provided opportunity to respond the fact of non-delivery of notice under section 133(6) of the Act. He further referred to page 560 of the paper book which is a copy of letter dated 28/08/2018 filed before the learned CIT(A) requesting to produce all the parties from whom fresh share application money was raised during the year under consideration. The Ld. counsel submitted that the learned CIT(A) did not provide any opportunity to the assessee to produce those parties either before him or before the learned Assessing Officer and decided the matter against the assessee in violation of the principle of natural justice.
5.1. Before us the Ld. counsel of the assessee has given undertaking that if matter is restored back to the Assessing Officer for deciding afresh, the assessee shall produce all the share subscribers along with all required documents for necessary examination by the Assessing Officer.
Ld. DR on the other hand submitted that the assessee did not comply before the Assessing Officer. Accordingly, the Ld. CIT(A) did not allow the additional evidences in terms of rule 46A of Income Tax Rules, 1962. With reference to ground No. one and two of the appeal, She submitted that notices under section 133(6) were sent to the addresses provided by the persons in their ITR for assessment year 2013-14 and assessee did not submit any evidence that those persons have changed their addresses in the latest ITR filed, and thus, the Assessing Officer cannot be faulted for non-delivery of notice under section 133(6) of the Act. The Ld. DR submitted that the assessee has not furnished any explanation for the show cause notice issued dated 19/02/2016 with direction to produce the share applicant parties and the assessee deliberately failed to produce them with an intention to thwart the enquiry. The Ld. DR referred to the decision of the Hon’ble Delhi High Court in the case of CIT Vs Empire Biotech P Ltd 361 ITR 258 (Del) where it is held that when the assessee does not produce evidence or tries to avoid the appearance before the assessing authority, it necessarily creates difficulties and prevents ascertainment of truth and correct facts as the AO is denied advantage of the attendance before him and adverse opinion should be drawn. With reference to ground No. 3 of the appeal, the Ld DR referred to decision of the Hon’ble Supreme Court in the case of NRA Iron and steel (P) Ltd reported in (2019) 103 taxmann.com 48(SC). She further referred to decision of the Hon’ble Delhi High Court in the case of CIT Vs Oasis Hospitalities Private Limited 333 ITR 119 (Del) wherein it is held that merely providing the identity of the investor does not discharge the onus of the assessee if the capacity or creditworthiness has not been established. The DR submitted that one of the share applicants was a penny stock company which provided bogus long-term capital gains to various persons. The Ld. DR also relied on decision of Hon’ble Delhi High Court dated 17/01/2019 in the case of CIT Vs NDR promoter’s private Limited in ITA 49/2018. In view of the arguments, she objected for restoring the matter back to the file of the Assessing Officer.
We have heard rival submission of the parties and perused the relevant material on record. On perusal of the order of the Assessing Officer and the Ld. CIT(A), it is evident that notices under section 133(6) have not been issued to all the share applicant parties and the notices have been issued on the basis of the addresses of the share applicants provided in return of income filed by them for assessment year 2013-14. The assessee has contended that those share applicant parties shifted to new addresses and therefore the notices could not be served upon them. The contention of the Revenue is that onus was on the assessee to provide complete and correct address to the Assessing Officer. In the facts of the case, we are of the opinion that whatever may be the reasons, it is evident that those parties could not respond to the notices issued under section 133(6) of the Act and the assessee also failed to produce them before the Assessing Officer. Now, before us, the Ld. Counsel of the assessee has given undertaking that if matter is restored back to the Assessing Officer, the assessee shall produce all the share applicant parties along with all the required documents to discharge its onus of proving the identity & creditworthiness of the share applicant parties and genuineness of the transaction as required under section 68 of the Act. In view of the facts and circumstances of the case and the undertaking given by the Ld. counsel of the assessee, in the interest of the substantial justice, we feel it appropriate that the assessee must be provided an opportunity to produce all those share applicant parties, which the learned CIT(A) did not provide despite request on the part of the assessee.
Accordingly, we restore the issue in dispute involved in the grounds of the appeal to the file of the Ld. Assessing Officer for deciding afresh with the direction to the assessee to produce all the share applicant parties before the Assessing Officer along with all documentary evidences which it wants to rely upon. The assessee shall be afforded adequate opportunity of being heard. The grounds of the appeal of the assessee are accordingly allowed for the statistical purposes.
In the result, the appeal of the assessee is allowed for the statistical purposes.