HARYANA DISTILLERY LTD.,NEW DELHI vs. DCIT, CIRCLE- 11(1), NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : C : NEW DELHI

BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER ITA No.1452/Del/2018 Assessment Year: 2008-09 Haryana Distillery Ltd., Vs. DCIT, 16, Community Centre, Circle-11(1), New Friends Colony, New Delhi. New Delhi. PAN: AABCH0933K (Appellant) (Respondent) Assessee by : Shri K. Sampath, Advocate Shri Raj Kumar, Advocate Revenue by : Shri Arun Kumar Yadav, Sr. DR Date of Hearing : 31.08.2018 Date of Pronouncement : 20.11.2018 ORDER PER R.K. PANDA, AM: This appeal by the assessee is directed against the order dated 4th December, 2017 of the CIT(A)-35, New Delhi relating to Assessment Year 2008-09.

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of Rs.1,73,93,322/-. Subsequently, the Assessing Officer reopened the assessment u/s

147 of the Act by recording the following reasons:-

“Certain investigations were carried out by the Directorate of Investigation, Jhandewalan, New Delhi in respect of the bogus/accommodation entries provided by Surendra Kumar Jain group of cases, The assessee company is identified as one of the beneficiaries of these alleged bogus transactions by the Directorate after making the necessary enquiries. It has been revealed that the following entries have been received by the assessee:

Name of Amount Cheque/ Date Bank Name of the company Name of the Beneficiary (Rs.) DD No. Detail used for providing Middleman/ accommodation entry Mediator M/s Haryana 50,00,000 214327 18.12.2007 DCB Finage Lease & Finance KK GARG Distillery Ltd. India Ltd.

'The above amount of Rs. 50,00,000/- has been credited into assessee's bank account in F Y. 2007-08. Investigation made by the Investigation Wing of the Department has found that assessee is a beneficiary of taking the aforesaid accommodation entries. I have also perused various materials and report from Investigation Wing and on that basis it is observed that the assessee company has introduced its own unaccounted money in its bank account by way of above accommodation entries. On perusal of the documents on record as well as the information received from the investigation wing, I am satisfied and have reason to believe that the income of the assessee company amounting to Rs. 50,00,000/- has escaped assessment. The escapement of income has been clearly on account of failure on the part of the assessee company to truly and fully disclosed all material facts necessary for assessment. Thus, it is fit case for initiation of proceedings u/s 147 of the Income Tax Act, 1961.

Submitted for kind perusal and approval as per provision of section 151(2) of the Income Tax Act, 1961.”

In response to notice u/s 148 of the IT Act, the assessee filed a letter dated 13th 3.

April, 2015 stating that the original return filed for the year under consideration may

be treated as return filed in response to notice u/s 148 of the IT Act. Subsequently, the

Assessing Officer issued notice u/s 143(2) of the Act in response to which the assessee

attended the proceedings from time to time as required.

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that the assessee, during the year under consideration, has introduced the share capital

from various parties, the details of which are as under:-

S.No. Name of Investor Amount in Rs. No. of shares Allotted 1. Anupam Securities Pvt. Ltd. 15,00,000 150000 2. Finage Leasing & Finance (India) Ltd. 50,00,000 500000 3. Dhiraj Commercial Pvt. Ltd. 83,50,000 835000 4. Comshare Investment Pvt. Ltd. 11,75,000 117500 5. Photonics Pvt. Ltd. 1,00,00,000 1000000 6. Pravesh Build & Dev. P. Ltd. 1,20,00,000 1200000 7. Skyrise Construction Co Pvt. Ltd. 61,00,000 760000 8. First Alert Fire Sys. Pvt. Ltd. 17,90,000 179000 9. Indo French Cosmetics Pvt. Ltd. 16,00,000 160000 10. Jewel Electro Impex Pvt. Ltd. 16,00,000 160000 11. Laoleen Investment Pvt. Ltd. 17,00,000 170000 12. Upasana Investment Pvt. Ltd. 8,00,000 80000 13. Photonics Fire Plot Sys P. Ltd. 8,25,000 82500 14. Setwell Cement P Ltd. 16,00,000 160000 15. Rahul Commercial Pvt. Ltd. 86,50,000 865000 16. Vikee Commercial Pvt. Ltd. 75,00,000 750000 17. Appolo Brew. P. Ltd. 84,00,000 840000 Total 5,08,15,000

companies at par. He examined the audited balance sheet of the assessee company

and noted that the earning per share of the assessee company as on 31.03.2008 was

Rs.0.51 per share. He asked the assessee to explain regarding the identity and credit

worthiness of the share applicants and the genuineness of the transactions within the

meaning of section 68 of the IT Act. From the details furnished by the assessee, the

Assessing Officer noted that the applicant companies are either not having any income

or having negligible income as per their balance sheet. He further observed that the

assessee has also taken share capital of Rs.50 lakhs from Finage Leasing & Finance

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(India) Ltd. through S.K. Jain who is an intermediary. He referred to the search and

seizure operation u/s 132 of the IT Act conducted at the business and residential

premises of S.K. Jain group of cases, the modus operandi adopted by them and

observed that as per the report of the Investigation Wing, the assessee, M/s Haryana

Distillery Ltd., has been identified as one of the beneficiaries from these companies

handled by S.K. Jain group of cases. Since Finage Leasing & Finance (India) Ltd., is

a dummy company and not having capacity to deposit such a huge amount as share

capital, the Assessing Officer had certain doubts about this. Rejecting various

explanations given by the assessee and observing that the assessee failed to discharge

its onus to substantiate the identity, credit worthiness and genuineness of the

transaction in terms of the provisions of section 68 of the IT Act, the Assessing

Officer, relying on various decisions, made addition of Rs.5,08,15,000/- to the total

income of the assessee by invoking the provisions of section 68 of the IT Act. The

Assessing Officer further made addition of Rs.9,14,670/- being the commission paid

for getting accommodation entry of the said amount of Rs.5,08,15,000/-.

challenged the validity of the reopening of the assessment on the ground that it is

barred by limitation since the original assessment was completed u/s 143(3) and the

period of four years from the end of the relevant assessment year has elapsed and,

therefore, in terms of first proviso to section 147, the reassessment proceedings are

null and void. So far as the merit of the case is concerned, it was argued that the

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assessee has discharged the onus cast on it by furnishing the requisite details. It was

argued that all the subscribers to the share capital are existing entities belonging to the

assessee’s group except Finage Leasing & Finance (India) Ltd. It was argued that in

respect of all the companies, confirmations, bank accounts, copies of income-tax

return acknowledgements, copies of assessment orders and various other evidences

were furnished to substantiate the identity and credit worthiness of the share applicants

and the genuineness of the transactions. It was submitted that the copy of assessment

order passed u/s 153C/153A in the case of M/s Finage Leasing & Finance (India)

Ltd., was submitted before the A.O. to substantiate that the returned loss was accepted

in the case of the company and no addition was made in the hands of that company

and the A.O. has completely ignored the same.

6.1 However, the ld.CIT(A) was not satisfied with the explanation given by the

assessee and upheld the action of the A.O. in reopening of the assessment and addition

u/s 68 of the IT Act, 1961. So far as the validity of the re-assessment proceedings are

concerned, she held that the A.O. has issued the notice u/s 148 as per the provisions of

the IT Act, 1961. So far as the merit of the case is concerned, the CIT(A), relying on

various decisions, held that the initial onus cast on the assessee to prove the identity,

genuineness and credit worthiness of the persons in whose name the credit entries are

appearing by way of share capital/share premium, loan or credit, etc., has not been

discharged. Distinguishing various decisions cited before him and relying on various

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other decisions, the ld.CIT(A) held that the Assessing Officer has correctly made the

addition u/s 68 of the IT Act.

6.2. Aggrieved with such order of the CIT(A), the assessee is in appeal before the

Tribunal by raising the following grounds:-

"On the facts and in the circumstances of the case and in law, the CIT (A) erred in:- 1. initiating proceedings u/s 147 of the Income-tax Act, 1961 (the Act) in the absence of any plausible reason for the formation of a belief as to the escapement of any income; 2. issuing notice u/s 148 of the Act as the same was barred by limitation in terms of first proviso to section 147 of the Act; 3. not disposing of the objections filed u/s 147/148 in response to reopening of assessment u/s 147 of the Act; 4. making following additions to the income assessed u/s 143(3) of the Act:

a) Rs.5,08,15,000/- on account of share application money received by invoking provisions of section 68 of the Act; b) Rs.9,14,670/- on account of alleged commission paid on conjectures and surmises without there being any evidence with regard to such expenditure. All the above acts being arbitrary, misconceived, fallacious and unjust must be quashed with directions for relief and also consequential benefits. The assessee craves leave to add, delete, modify all or any of the grounds taken above”

appeal No.3 for which the ld. DR has no objection. Accordingly, the said ground is

dismissed. So far as Ground of Appeal No.1 is concerned, the ld. counsel for the

assessee drew the attention of the Bench to the proviso to section 147 of the IT act and

submitted that where an assessment u/s 143(3) has been made for the relevant

assessment year, no action shall be taken under this section after the expiry of four

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years from the end of the relevant assessment year unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return u/s 139 or in response to notice issued under sub- section 1 of section 142 or section 148 or to disclose fully and truly all material facts necessary for the assessment for that assessment year. He submitted that the assessee in the instant case, during the original assessment proceedings had submitted the various details required by the Assessing Officer for completing the assessment. Referring to the questionnaire issued by the Assessing Officer vide letter dated 20th October, 2010, he submitted that vide question No.8 the Assessing Officer had asked the details regarding the share capital, loans other than bank loans and inter-corporate deposits taken during the year and after going through the various details, the Assessing Officer had accepted the share capital and share premium received by the assessee as genuine and there was no addition made in the assessment order. Referring to page 14 of the paper book, he submitted that the Assessing Officer had issued notice u/s 154/155 of the IT Act vide letter dated 19th October, 2012 and there was no such doubt raised by the Assessing Officer nor any defect or deficiency was pointed by the Assessing Officer. Further, the information received by the Assessing Officer on the basis of which he has reopened the assessment is very vague, unspecific and incomplete. Relying on various decisions , he submitted that the reassessment proceedings initiated by the Assessing Officer is not justified. For the above proposition, the ld. counsel for the assessee relied on the following decisions:- i) Amar Jewellers Ltd. vs. DCIT (2018) 92 Taxmann.com 4 (Guj); 7

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ii) Pr. CIT vs. Light Carts P. Ltd. (2018) 404 ITR 574 (All); iii) NTPC Ltd. vs. DCIT (2014) 360 ITR 380 (Del); iv) NTPC Ltd. vs. DCIT (2013) 350 ITR 614 (Del); v) DIT vs. Mc Donalds Corporation (2013) 213 Taxman 26 (Del); vi) BLB Limited vs. ACIT (2012) 343 ITR 129 (Del); vii) CIT vs. Noble Resources (2011) 202 Taxman 223 (Del); viii) CIT vs. Sil Investments Ltd. (2011) 339 ITR 166 (Del); ix) D.T. & T.D.C. Ltd. ACIT (2010) 324 ITR 234 (Del); x) JSRS Udyog Ltd. vs. ITO (2009) 313 ITR 321 (Del); xi) Wel Intertrade P. Ltd. vs. ITO (2009) 308 ITR 22 (Del); xii) CIT vs. Indian Farmers Fert. (2008) 171 Taxman 379 (Del); xiii) CIT vs. Foramer France (2003) 264 ITR 566 (SC); xiv) ITO vs. Madnani Engineering Works Ltd. (1979) 118 ITR 1 (SC).

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Finage Leasing & Finance (India) Ltd. In respect of all these companies, confirmations, bank accounts, copies of income-tax returns along with acknowledgements, copies of assessment orders and various other details were

furnished to substantiate the identity and credit worthiness of the share applicants and the genuineness of the transaction. However, the Assessing Officer as well as the CIT(A) have ignored all such evidences and have made the addition. Referring to page 220 of the paper book, the ld. counsel for the assessee drew the attention of the Bench to the order passed u/s 153C/153A of the Income-tax Act, 1961 dated 28th March, 2013 in the case of M/s Finage Leasing & Finance (India) Ltd. and submitted that although M/s Finage Leasing & Finance (India) Ltd. has invested an amount of

Rs.50 lakhs in the share capital of the assessee company, no such addition has been made in the hands of the said company and the returned loss of Rs.33,245/- has been accepted. So far as the other applicants are concerned, he submitted that all those

companies are group companies and they have sufficient net worth to invest in the shares of the assessee company. He, accordingly, submitted that even on merit the addition cannot be made and the order of the CIT(A) deserves to be set aside.

submitted that the assessee, during the original assessment proceedings, has not furnished the full particulars regarding the identity and credit worthiness of the loan

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creditors and the genuineness of the transaction. There was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the completion of the assessment. Therefore, the initiation of reassessment proceedings u/s 147 of the IT Act is fully justified. So far as the merit of the case is concerned, he submitted that the assessee in the instant case has failed to substantiate with evidence to the satisfaction of the Assessing Officer regarding the identity and credit worthiness of the share applicants and the genuineness of the transaction. Therefore, the order of the CIT(A) is fully justified under the facts and circumstances of the case.

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failure on the part of the assessee to make a return u/s 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly

all material facts necessary for his assessment for that assessment year. In the instant case, the assessee has furnished a return u/s 139(1) of the Act. The reason for reopening of the assessment was that the assessee has accepted an amount of Rs.50

lakhs as share application money from M/s Finage Leasing & Finance (India) Ltd. We find from page 220 of the paper book that the ACIT, Central Circle-23, New Delhi, vide order dated 28th March, 2013, has completed the assessment u/s 153C/153A of the Income-tax Act, 1961 and has accepted the returned loss of

Rs.3,245/- and has not made any addition in the hands of M/s Finage Leasing & Finance (India) Ltd., who has invested an amount of Rs.50 lakhs in the share capital of the assessee company. Therefore, the said company also cannot be treated as bogus.

Since the assessee, in the instant case, has furnished all material facts necessary for completion of the original assessment u/s 143(3) of the IT Act and the assessment has been reopened after the period of four years from the end of the relevant assessment

year, therefore, in view of the proviso to section 147 of the IT Act, we are of the considered opinion that such reassessment proceedings are barred by limitation and, therefore, have to be quashed. We, therefore, quash the reassessment proceedings

initiated u/s 147 of the IT Act, 1961. The various judgements relied on by the ld. DR are distinguishable and not applicable to the facts of the present case. Since the assessee succeeds on the legal ground, the various other grounds challenging the

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addition on merit are not being adjudicated as they have become academic in nature. The grounds raised by the assessee are, accordingly, allowed.

Sd/- Sd/- (SUCHITRA KAMBLE) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMFBER Dated: 20th November, 2018 dk Copy forwarded to 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi