Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH ‘D’ : NEW DELHI
Before: SHRI N.K. BILLAIYA & SHRI KULDIP SINGH
PER KULDIP SINGH, JUDICIAL MEMBER :
The appellant, M/s. Upyogi Finvest (P) Limited (hereinafter referred to as ‘the assessee’) by filing the present appeal, sought to set aside the impugned order dated 09.09.2011 passed by Ld. CIT (Appeals)-XXI, New Delhi qua the assessment year 2003-04 on the grounds inter alia that :-
“1. That the learned CIT. (A) has erred In upholding the action of the A.O. in respect of invoking the provisions of section 147/148 of the Act as the conditions precedent before invoking section 147/148 had not been complied with and consequently the order of the Ld.ITO be annulled. 2. That without prejudice to ground no.1 as above, the learned CIT (A) has also erred In confirming the addition of Rs.45,00,000/- on account of sale of Equity Shares, u/s.68 of the Act towards assessable income of the appellant.”
Briefly stated the facts necessary for adjudication of the controversy at hand are : after processing of the return of income filed by the assessee under section 143 (1) of the Income-tax Act, 1961 (for short ‘the Act’), the case was reopened u/s 147 of the Act after recording reasons. During the assessment proceedings, the assessee was called upon to furnish bank account and address of M/s. MKM Finsec (P) Ltd. but none appeared on behalf of the assessee. So, AO proceeded to conclude that assessee has failed to prove the identity, genuineness and creditworthiness of M/s. MKM Finsec (P) Ltd. and treated an amount of Rs.45,00,000/- received from M/s. MKM Finsec (P) Ltd. as accommodation entry and made addition thereof to the total income of the assessee.
Assessee carried the matter by way of appeal before the ld. CIT (A) who has dismissed the appeal. Feeling aggrieved, the assessee has come up before the Tribunal by way of filing the present appeal.
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.
6. Undisputedly, premises of M/s. MKM Finsec (P) Ltd. were searched on 06.07.2006 and panchnama, available at page 83 of the paper book, was prepared. It is also not in dispute that the ld. CIT (A) has entertained additional evidence sought to be brought on record by the assessee under Rule 46A of the Income-tax Rules, 1962 (for short ‘the Rules’). It is also not in dispute that the reopening was made by the AO after receiving information from Investigation Wing.
In the backdrop of the aforesaid undisputed facts, the first question arises for determination in this case is :-
“as to whether the AO has applied his mind before reopening the assessment?”
First of all, reasons stated to be recorded by the AO in para 1 of the assessment have not seen the light of the day nor the same have been brought to the notice of the Bench during arguments by the ld. DR. However, there is a bare reference in para 3.3 of ld. CIT (A) that the reopening was made after receiving information from Investigation Wing vide letter no.255 dated 16.06.2006 that the assessee had received a sum of Rs.45,00,000/- by way of cheque. So, it shows that merely on the basis of information received from Investigation Wing, reopening has been made.
Furthermore, the ld. AO treated the amount of Rs.45,00,000/- as accommodation entry received by the assessee from M/s. MKM Finsec (P) Ltd. on the ground that the assessee has failed to prove the identity, genuineness and creditworthiness of the company. When we examine the impugned order passed by ld. CIT (A), it is undisputed fact that the ld. CIT (A) allowed the application moved by the assessee under Rule 46A of the Rules and thereafter called remand report from the AO. It is the case of sale of shares made by the assessee purchased during the earlier assessment year which has been duly recorded in the balance sheet of respective years and drew our attention towards computation of taxable income of assessee for AY 2003-04 wherein amount of Rs.3,80,250/- has been shown as business income on account of profit and sale of investment/capital gains.
The ld. AR for the assessee also drew our attention to schedules forming part of the balance sheet as on 31.03.2003, available at page 69 of the paper book, wherein investment of shares has been duly shown at Rs.50,000/- and Rs.3,00,000/- in Swift Formulations Pvt. Ltd. and Mukur Pharmaceutical Co. Pvt. Ltd. respectively. Furthermore, assessee brought on record statement of account of M/s. MKM Finsec (P) Ltd., available at page 82 of the paper book, showing sale of 2000 equity shares of Mukur Pharmaceuticals Pvt. Ltd. and 3500 shares of Swift Formulations Pvt. Ltd. by the assessee for a total consideration of Rs.46,30,422.50 and declared net capital gain of Rs.40,80,422.50 as per computation of long term capital gain, available at page 77 of the paper book. So, the net gain shown by the assessee was Rs.39,737.17 after loss of Rs.40,40,685.33 as recorded in the computation of taxable income, available at page 68 of the paper book. Assessee has duly disclosed these facts in the profit & loss account which has not been disputed by the AO.
When the AO has accepted the net capital gain of Rs.39,737.17, the reopening as well as addition is not sustainable.
Insofar as question of establishing the identity and genuineness of M/s. MKM Finsec (P) Ltd. is concerned, the Inspector of Income- tax has reported that summons served but he did not appear. In these circumstances, when M/s. MKM Finsec (P) Ltd. has been duly served the assessee has discharged its onus and it was for the Revenue to procure its presence. Moreover when it is undisputed case of the Revenue that the premises of M/s. MKM Finsec (P)
Ltd. was searched by the Revenue authorities on 06.07.2006 its identity and genuineness cannot be disputed. Furthermore, identity, existence and genuineness of M/s. MKM Finsec (P) Ltd. has already been taken as proved by the Revenue in the case decided by the coordinate Bench of the Tribunal in M/s. MKM Finsec (P) Ltd. for AY 2000-01 in order dated13.05.2011.
Identity and genuineness of M/s. MKM Finsec (P) Ltd. has already been established in case cited as CIT vs. M/s. Vishal Holding & Capital (P) Ltd. – (2011) 200 taxman 186 (Del.) decided by Hon’ble Delhi High Court, relied upon by the assessee, the operative part of which is extracted as under :-
“ We are of the view that the assessee had produced copies of accounts, bills and contract notes issued by M/s. MKM Finsec Pvt. Ltd., and had been maintaining books of account as per Companies Act. The assessee had also demonstrated the purchase and sale of shares over a period of time as seen from the balance sheet's. In our opinion, the Assessing Officer has simply acted on the information received from the Investigation Wing without verifying the details furnished by the assessee. The assessee has also produced best possible evidence to support its claim. Consequently the addition made by the Assessing Officer cannot be sustained. In any event, the factual findings of the final fact finding authority are neither perverse nor contrary to record. Accordingly, we find that no. substantial question of law arises in the present appeal which, being bereft of merit, is dismissed in limine but with no order as to costs."
Furthermore, the ld. AR for the assessee contended that its case is also covered by the decision rendered by the coordinate Bench of the Tribunal in ITO vs. Goodwill Cresec Pvt. Ltd. – order dated 25.01.2012 wherein addition was also made on the basis of information received by the AO from Investigation Wing as to the share transaction entered into with M/s. MKM Finsec (P) Ltd.. Operative part of the order is extracted as under :-
" We have carefully considered the rival submissions in the light of the material placed before us. In the present case, the assessee had submitted ample evidence which has already been discussed in the above part of this order to contend that the share transaction entered into by it with MKM Finsec Pvt. Ltd. was a genuine transaction. The shares which were subject matter of sale were standing in the balance sheet of the assessee which were subject matter of sale. The party to whom the sales have been made have confirmed the transactions and the transaction was supported by documentary evidence. It is also the case of the assessee that no material has been brought on record by the revenue that the share transaction of the assessee was not genuine. The addition has been made on the basis of information received by the Assessing Officer from the Investigation Wing. It is found that in respect of the very same party an addition of Rs.49,55,300/- was made in the case of ITO vs. Vishal Holding and Capital Pvt. Ltd. (supra) and learned CIT (A) had deleted the addition and the said deletion was contested by the revenue before the Tribunal and it was decided by the Tribunal vide order dated 17th July, 2009 In and the order of the CIT (A) was upheld with the following observations:- "5. We have considered rival contentions and gone through the records, In our view the order of the CIT(A) does not require any interference. First of all the assessee has produced all details in respect of its transactions. Copies of the contract notes and bills, that were issued to it, were all made available. The Assessing Officer has not verified these details and in respect of the material, which has been relied upon by him, he has not provided any findings of the investigation to the assessee. Therefore, in these circumstances, the addition made by the Assessing Officer cannot be said to be on the basis of some evidence that was put to the assessee in the course of assessment proceedings. The learned CIT(A) has correctly deleted the addition and we decline to interfere. Accordingly, order of CIT(A) on the issue in question is upheld.
In the result, revenue's appeal is dismissed.” The aforementioned order of the Tribunal was considered by Hon'ble jurisdictional High Court in the aforementioned case of CIT vs. Vishal Holding and Capital Pvt. Ltd. which is now reported at 200 Taxman 186 and the order of the Tribunal was upheld by the Hon'ble High Court with the following observations:- "6. We are of the view that the assessee had produced copies of accounts, bills and contract notes issued by M/s. MKM Finsec Pvt. Ltd. and had been maintaining books of account as per Companies Act. The assessee had also demonstrated the purchase and sale of shares over a period of time as seen from the balance sheet/so In our opinion, the AO has simply acted on the information received from the Investigation Wing without verifying the details furnished by the assessee."
So, in view of what has been discussed above, we are of the considered view that the ld. CIT (A) has erred in upholding the reopening made by the AO u/s 147/148 of the Act which was without any application of mind. The ld. CIT (A) has further erred in confirming the disallowance of Rs.45 lakhs made by the AO on account of equity shares u/s 68 of the Act to the total income of the assessee, hence same is ordered to be deleted. Consequently, appeal filed by the assessee is allowed. Order pronounced in open court on this 19th day of July, 2018.