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Income Tax Appellate Tribunal, DELHI BENCH “D” NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI PRASHANT MAHARISHI
PER AMIT SHUKLA, J.M.: The aforesaid appeal has been filed by the assessee against the impugned order dated 31.08.2015, passed by Ld. CIT (Appeals)-VI, Delhi in relation to penalty proceedings u/s. 271(1)(c) for the Assessment Year 2006-07. The assessee is mainly aggrieved by levy of penalty of Rs.5,04,900/- on account of addition made u/s.68 in respect of share application money from two companies for sums aggregating to Rs.15 lacs.
The facts in brief qua the addition relating to levy of penalty u/s. 271(1)(c) are that, the assessee has received sum of Rs.15 lacs towards share application money from the following two companies:-
S. No. Name & address Amount (Rs.) Details of cheque/DD/PO No. & bank M/s. Ganga Infin Pvt. Ltd. 7,00,000/- 55,792 Dated 09/01/2006 payable on the Ramgharia co- operative Bank, Paharganj, New Delhi M/s. Kuberco Sales Pvt. 8,00,000/- 671226, dated Ltd. 09/01/2006 payable on the the banks of Rajasthan Ltd.
Learned Assessing Officer noted that the aforesaid two companies have been subjected to certain inquiries and investigation by the Investigation Wing, wherein they were found to have no creditworthiness nor do they have any worthwhile sources of income; and they were only paper entities floated for the purpose of arranging accommodation entries to the others. The assessee company had filed affidavits from the said entities and on behalf of M/s. Ganga Infin Pvt. Ltd. is purported to have been signed by Shri Mahesh Garg, Director; and on behalf of M/s. Kuberco Sales Pvt. Ltd. it was signed by Shri Anil Kumar, Director. Apart from this confirmation, Assessing Officer noted that no supporting documents in support of identity and creditworthiness of the parties and genuineness of the transactions were filed. He also noted that in the bank account of these companies certain cash were deposited before issuing the cheque in favour of the assessee company.
Further, Shri Mahesh Garg in his sworn statement u/s.131 before Additional Director of Income Tax (Investigation) have admitted that said companies were not carrying any actual business activities and no books of account have been maintained. The Assessing Officer again issued summons u/s.131 to the Principal Officers of these companies to appear in person before him along with books of account and copies of statement. However, these notices were received back with the postal remark ‘left’. All these facts were confronted to the assessee. In response, the assessee submitted that both the parties have shifted to different location and fresh notice may be issued. However, Assessing Officer noted that in the ROC record new address has not been furnished; still he sent the summons on the new addresses which too remained un- complied with. The sum and substance of assessee’s submission before the Assessing Officer were as under:- “a) The assessee company has filed confirmations. The said share applicants are companies incorporated under the Companies Act. The assessee company has discharged its onus by filing above documents evidencing their identity. b) The statements given by the above persons are vague and general in nature and these persons have not specifically mentioned the name of the assessee company. The assessee may be provided an opportunity to cross examine them. The statements relate to their activities in the past and not to the any transactions undertaken during the year under assessment. The payments have been received through banking channels c) and have also since been refunded on 23.10.2007 and 15.11.2007.
The assessee having furnished confirmations from the d) creditors, the onus on it u/s 68 stands discharged. It is not for the assessee to find out the actual source or sources from where the creditor has accumulated the amount in question. The assessee may be given an opportunity to cross-examine e) the person viz. Sh. Mahesh Garg and his associates, mentioned above.
However, the Assessing Officer after detailed discussion, added the amount of Rs.15 lac as unaccounted money of the assessee and also added commission for arranging such share application money @2.5% for sum of Rs.37500/-. The aforesaid addition in the quantum proceedings has been confirmed. Now, the penalty has been levied on such an addition.
Ld. CIT (A) too has confirmed the penalty of Rs.5,04,900/- after detailed discussion and relying upon various judgments. By and large in his entire order, he has discussed the fundamental principle and law relating to penalty u/s. 271(1)(c) and catena of decisions and also relied upon the quantum order of the Tribunal order.
Before us, ld. counsel for the assessee submitted that not only during the course of assessment proceedings but also during the course of penalty proceedings the assessee had submitted following evidences/records to substantiate the identity, creditworthiness of the parties and genuineness of the transactions. The documents relating to these parties have been furnished in the paper book. The details of which are incorporated as under:-
7. Reply submitted to Assessing Officer 42 to 51 dated 15.09.2008 along with: M/s. Ganga Infin Pvt. Ltd. i) Company Master data as per ROC 52 to 52 record. 53 to 53 ii) Copy of Notarised Affidavit 54 to 55 iii) Copy of confirmation iv) Copy of Bank statement of appellant company confirming the 56 to 58 repayment of amount v) Copy of share application along 59 to 60 with board resolution M/s. Kuberco Sales Pvt. Ltd. (i) Company Master data as per ROC 61 to 61 record (ii) Copy of Notarised Affidavit 62 to 62 (iii) Copy of confirmation 63 to 63 (iv) Copy application along with board 64 to 65 resolution for the allotment of share Reply submitted to Assessing Officer 8. 66 to 69 dated 17.10.2008 along with: (i) Copy of ITR Ack. Of M/s. Ganga Infin Pvt. Ltd. (ii) Statement of Account of M/s. 70 to 70 Ganga Infin Pvt. Ltd. as on 31.03.2005 71 to 72 (iii) Copy of ITR ack. Of M/s. Kuberco Sales pvt. Ltd. 73 to 73 (iv) Statement of Account of M/s. Kuberco Sales Pvt. Ltd. as on 74 to 74 31.03.2005
Apart from that, he submitted that these parties have replied directly to the Assessing Officer in response to the summons issued u/s.131, copy of which are appearing at pages 77 to 80 and these summons were responded by these parties vide letter dated 24th October, 2008 and 31st October, 2008 filed in the office of the Officer on 31.10.2008, i.e., during the course of assessment proceedings. Thus, the onus cast upon the assessee stood duly discharged and nowhere has it been brought on record that Shri Mahesh Garg has stated that he has given any accommodation entry to the assessee and the documents furnished by the assessee are bogus. Hence, on these facts, no penalty can be levied.
On the other hand, learned Department Representative strongly relied upon the order of the ld. CIT (A) and submitted that once the entire addition has been confirmed by the Tribunal on the ground that it was a sham transaction taken from paper entities, therefore, penalty levied on such addition should be confirmed.
We have heard the rival submissions and also perused the relevant findings given in the impugned orders as well as material referred to before us. The assessee had received share application money of sum of Rs.7 lacs and Rs.8 lacs from M/s. Ganga Infin Pvt. Ltd. and M/s. Kuberco Sales Pvt. Ltd., respectively. In support of these documents, the assessee had filed sworn affidavit of the Diretors, confirmations, bank statement of the companies, copy of share application money with Board Resolution, copy of income tax return, statement of accounts, etc. Apart from that, we find that these parties have also given their reply before the Assessing Officer in response to summons u/s.131. For the sake of proper appreciation of the said facts, the replies filed by these parties before the Assessing Officer directly are reproduced hereunder:-
The Income Tax Officer, Ward-13(2), Room No.338 C.R. Building, New Delhi Subject: Your summon under section 131 issued to our company Reference: Income Tax assessment of M/s. New Era Infrastructure Private Limited for the Assessment Year 2006-07 Dear Sir, We are in receipt of aforesaid summons dated 22/10/2008 wherein you have asked us to present personally before your goodself on 31st Oct. 2008.
I am suffering from viral Fever, therefore, unable to attend your office, however required information in connection with The case of M/s. New Era Infrastructure Pvt. Ltd., 363, Agarwal City Plaza, Mangalam Palace, Near M2K Cinema, Rohini, Delhi-110 085 with due explanations are hereby confirmed. I Mahesh Garg 5/0 Shri R.S. Garg is the director of M/s. Canga 1 Infin Pvt. Ltd. presently operating from 104, B. D. Chambers, D.B. Supta Road, Karol Bagh, New Delhi-5. That we have given an amount of Rs. 7,00,000/- vide Ch. No. 2 55792 dated 9th January, 2006 payable on our bank, The Ramgarhiya Co-operative Bank, Pahar Ganj, New Delhi to M/s. New Ear Infrastructure Pvt. Ltd, 363, Agarwal City Plaza, Mangalam Palace, Near M2K Cinema, Rohini, Delhi-110 085. The above amount was given as share application money, but since no share has been allotted us by the said company, therefore, we have received back the above amount vide Ch. No. 439242 dated 23.10.2007 for Rs. 5,35,000/- payable on The South Indian Bank Ltd. and Rs. 1,65,000/- vide Ch. No. 195168 dated 23.10.2007 payable on Punjab National Bank from the above said company. That we have paid the above amount on 9th January 2006, out of 3 our owned funds in our current account maintained with our bank. The Ramgariya Co-operative Bank, Paharganj, New Delhi. 4 That we have deposited cash amounting to Rs. 7,00,000/- on 10th January 2006 in our bank and the said cash was out of the company's owned cash in hand as per books of account maintained in the company. That above transaction held by us with M/s. New Era 5 Infrastructure Pvt. Ltd. was out of the company's own funds and was part of the normal course of business.
Our company has not been allotted any share by M/s. New Era 6 Infrastructure Pvt. Ltd. therefore, our application money has already been returned back by the above said company. The details of which has already been explained in above para. We have not charged any interest on our amount for the period the 7 same was with M/s. New Era Infrastructure Pvt. Ltd. 8 We have also not availed any other benefits for the same. We are assessed to Income-tax at PAN AAACG4449G, New Delhi 9 This reply is only to comply the summon issued to our company in the case of M/s. New Era Infrastructure Pvt. Ltd., 363, Agarwal City Plaza, Mangalam Palace, Near M2K Cinema, Rohini, Delhi-110 085. Our company has also given an affidavit, confirming our transaction with M/s. New Era Infrastructure Pvt. Ltd. for the financial year ending 31st March 2006. Your goodself is hereby requested to consider our reply as our presence against the summon issued to our company under section 131 of the Income tax Act, 1961. Thanking you, For GANGA INFIN PVT. LTD.
(DIRECTOR) -------------------------------------------------------------------------------------------------- The Income-tax Officer, Ward 13(2), Room No. 338, C.R. Building, New Delhi Ref: Summon U/s.131 of the Income tax Act, 1961 in the case of M/s. New Era infrastructure Pvt. Ltd. for Asstt. yr. 2006-07 Dear sir, We are in receipt of above summons dt. 22/10/08 wherein you have asked us to present personally before your honor on 31/10/2008. Due to Diwali festival, I am going to out of the city to celebrate diwali with my parents, therefore, not in a position to attend your goodself on 31/10/2008. However, required information in connection with in the case of M/s. New Era Infrastructure Private Limited having their present address 363, Agarwal City Plaza, Mangalam Palace, Near M2K Cinema, Rohini, Delhi-85 with due explanation are hereby confirmed. 1 I Anil Kumar Son of Shri Mahender Kumar director of M/s. Kuberco Sales Private Limited presently operating from 104, B. D. Chambers, D.B. Gupta Road, Karol Bagh, New Delhi-5. 2 Our company had paid Rs. 8,00,000/- vide Cheque Number 671226 dated 09/01/2006 as share application money. We have not been allotted any equity share by M/s. New Era Infrastructure Private Limited against our application, therefore, the above amount of Rs. 8.00 lacs was returned back to us vide Cheque No.439245 dated 15/11/2007 payable on The South Indian Bank by the above said company. 3 We have paid the above amount on 09/01/2006 out of our owned funds maintained with our bank, The Bank of Rajasthan Ltd, New Rohtak Road, New Delhi. 4 That we have deposited cash an amount of Rs. 8.00 lacs/- on 10/01/2006 in our bank and the said cash was out of the company’s owned cash in hand as per books of accounts maintained in the company. 5 That above transaction held by us with M/s. New Era Infrastructure Pvt. Ltd. was out of the company’s own funds and was part of the normal course of business. 6 Our company has not been allotted any share by M/s. New Era Infrastructure Pvt. Ltd. therefore our application money has already been returned back by the above said company. The details of which has already been explained in above para. 7 We have not charged any interest on our amount for the period the same was with M/'s. New Era Infrastructure Private Limited. 8 We have also not availed any other benefits for the same. 9 We are assessed to Income-tax at PAN AABCK5160D, New Delhi This reply is only to comply the summon issued to our company in the case of M/s. New Era Infrastructure Private Limited, 363, Agarwal City Plaza, Mangalam Palace, Near M2K Cinema, Rohini, Delhi-110 085. Our company has also given an affidavit, confirming our transaction with M/s. New Era Infrastructure Pvt. Ltd. for the financial year ending 31st March 2006. Your goodself is hereby requested to consider our reply as our presence against the summons issued to our company under section 131 of the Income tax Act, 1961. Thanking you, For KUBERCO SALES PVT. LTD.
(ANIL KUMAR) DIRECTOR”
The only reason for making the addition was that, firstly, these parties did not appear before the Assessing Officer in response to the summons issued u/s.131; and secondly, in inquiry conducted by the Investigation Wing earlier these companies were found to be involved in providing accommodation entries. However, no specific inquiry or information pertaining to the assessee that these companies have provided the accommodation entries to the assessee was unearthed. Further assessee has filed various evidences to prima-facie prove the identity of the parties, creditworthiness; and genuineness of the transaction. In light of these facts and evidences the preponderance of probability goes in favour of the assessee that the share application money has come from the known sources for which the entire transactions have been confirmed. At least in the penalty proceedings, it can be inferred that once these evidences have not been rebutted or found to be false, we do not find any reason to confirm the penalty on such additions. Accordingly, same are directed to be deleted.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 26th July, 2018.