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IN THE INCOME-TAX APPELLATE TRIBUNAL “H” BENCH MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER (Assessment Year 2008-09) ACIT-4(3)(1), M/s Kenhans Shares & Stocks Pvt. Room No. 649, 6th Floor, Ltd., 302A Poonam Chambers, 3rd Floor, Dr. Annie Besant Road, Aayakar Bhavan, Vs. Mumbai-20 Mumbai-400018. PAN: AADCK1171C Appellant Respondent Appellant by : Shri M.C. Omi Ningshen(DR) Respondent by : None Date of Hearing : 04.07.2018 Date of Pronouncement : 04.07.2018 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER;
This appeal by Revenue is directed against the order of ld. Commissioner of Income-tax (Appeals)-9, Mumbai [ld. CIT(A)] dated 03.08.2015 for Assessment Year 2008-09. The Revenue has raised the following grounds of appeal:
1. “On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the penalty Rs. 28,00,000/- u/s.271(1)(c) of the Act, levied by the A.O. as the assessee filed inaccurate particulars of income on disallowance made u/s.68 of the I.T. Act, 1961.” 2. “On the facts and in the circumstances of the case, the impugned order of the Ld. CIT(A) is contrary to law and consequently merits to be set aside and that of the Assessing Officer be restored.”
None appeared on behalf of assessee despite the service of notice by RPAD.
Therefore, we left no option to decide the case on the basis of material available on record and on hearing the ld. DR for the revenue. Mum 15 - M/s Kenhans Shares & Stocks Pvt. Ltd.
We have heard the ld. Departmental Representative (DR) for the Revenue and perused the material available on record. The ld. DR for the Revenue fairly submits that the addition on the basis of which the penalty was levied has been deleted by the Tribunal in appeal against the quantum assessment in dated 02.09.2016.
We have considered the submission of ld. DR for the Revenue and perused the material available on record. We have noted that while passing assessment order the assessing officer made addition under section 68 for Rs. 96,00,000/-. The assessing officer initiated and levied the penalty on addition on account of unexplained cash credit under section 68 for Rs. 96,00,000/-. We have further noted that the co-ordinate bench of Tribunal in appeal for quantum assessment has deleted the entire addition vide order dated 02.09.2016 in ITA No. 3940/Mum/2012. For completeness of the order, the relevant part of the order of Tribunal is extracted below.
“8. We have heard the rival contentions and perused the record. We notice that the addition of share application money has been made u/s 68 of the Act. It is well settled proposition of law that the initial burden to prove the cash credits is placed upon the assessee u/s 68 of the Act, i.e., the assessee has to prove three main ingredients viz., the identity of the creditor, the credit worthiness of the creditor and the genuineness of the transactions. If the assessee discharges the initial burden placed upon him, then the burden shifts upon the shoulders of the assessing officer, who is required to disprove the evidences furnished by the assessee. If the AO does so, then the burden shifts upon the shoulders of the assessee, who is required to counter the view taken by the AO. There should not be any dispute that the facts available in each case have to be tested independently and the decision has to be taken by applying the principles discussed above. 2 Mum 15 - M/s Kenhans Shares & Stocks Pvt. Ltd.
In the instant case, we notice that the assessee has furnished copies of Certificate of Incorporation of the share applicants and the PAN numbers. The same establishes their identity. It is not in dispute that the share application money was received through banking channels. In fact, the AO himself has verified the same by calling for account copies from the respective bank accounts. Hence the genuineness of the transaction also stands proved. A perusal of the Balance Sheet furnished by all the Share applicants show that they have made impugned investments out of their own funds only. The following table clarifies this position:- Name of Share Applicant Investment Own Funds a. M/s Spider Web Solutions Ltd Rs.24.00 lakhs 200 lakhs b. M/s Saragossa Investment & Finance Rs.24.00 lakhs 250 lakhs c. M/s Komal Commercial Ltd Rs.24.00 lakhs 406 lakhs d. M/s Larite Industries Ltd Rs.24.00 lakhs 248 lakhs All the share applicants are also regularly filing return of income and the assessee has furnished copies of returns of income filed by them. It is seen that these companies have made other investments also. Thus, we notice that the assessee has discharged the initial onus placed upon it u/s 68 of the Act.
The tax authorities have made the addition only for the reason that the directors of share applicant companies did not respond to the notices/summons issued to them and the non-compliance has been interpreted by them as cases of providing accommodation entries. In this regard, the Ld D.R also placed reliance on the decision rendered by Hon’ble Delhi High Court in the case of Nova Promoters & Finlease (P) Ltd (supra). We have noticed that the facts prevailing in each case need to be examined in terms of sec. 68 of the Act. The facts prevailing in the case considered by Hon’ble Delhi High Court are that (a) The assessee therein received share application money of Rs.1,18,50,000/- during the year relevant to AY 2000-01. (b) The assessing officer re-opened the assessment upon receipt of a report from the Director of Income tax (Investigation) that 16 persons are providing accommodation entries to several persons, of which the assessee was also one.
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(c) The entry operators/accommodation providers have admitted before the Investigation wing in May 2004 that they have provided only accommodation entries. (d) During the course of assessment proceedings, the entry operators filed affidavits retracting the statement given by them before the Investigation wing. The retraction affidavits were filed in December, 2007, i.e., after expiry of more than three years after admitting the accommodation operations. (e) During the course of assessment proceedings, they did not respond to the notices/summons issued by the AO. Independent enquiry made by the Inspector also resulted in the finding that no such companies existed at the address furnished by the assessee. (f) Before Ld CIT(A), the assessee contended that they were not provided an opportunity to cross examine them. Hence the Ld CIT(A) remanded the matter to the AO. During the remand proceedings also, these entry operators did not appear before the AO. Under these peculiar set of facts, the Hon’ble Delhi High Court upheld the addition made by the AO u/s 68 of the Act.
Before the Hon’ble Delhi High Court, the assessee relied upon another decision rendered by the very same High Court in the case of CIT Vs. Hospitalities (P) Ltd (333 ITR 119). We notice that the facts prevailing in the present case is somewhat similar to the facts prevailing in the case of Hospitalities (P) Ltd (supra). The relevant discussions made by Hon’ble Delhi High Court in the case of Nova Promoters & Finlease (P) Ltd (supra) are extracted below:- “40. Reference was also made oil of the assessee to the recent judgment of a Division Bench of this court in CIT v. Hospitalities (P.) Ltd. [2011] 333 ITR 119/ 198 Taxman 247. We have given utmost consideration to the judgment. It disposes of several appeals in the case of different assessees. Except the case of Oasis Hospitalities (P.) Ltd (supra), the other cases fall under the category of Orissa Corporation (P) Ltd. (supra). However, in the case of Oasis Hospitalities (P.) Ltd., there is reference to information received by the Assessing Officer from the investigation wing of the revenue on the basis of which it was found that six investors belong to one Mahesh Garg Group who were not carrying oil real business activity and were engaged in the business 4 Mum 15 - M/s Kenhans Shares & Stocks Pvt. Ltd.
of providing accommodation entries. They were entry operators and the assessee in that case was alleged to be a beneficiary. While disposing of these appeals, this court observed: -
“The Assessees filed copies of PAN, acknowledgement of filing income tax returns of the companies, their bank account statements for the relevant period i.e. for the period when the cheques were cleared. However, the parties not produced in spite of specific direction of the AO instead of taking opportunities in this behalf. Since the so-called Directors of these companies were not produced on this ground coupled with the outcome of the detailed inquiry made by the Investigating Wing of the Department the AO made the addition. This addition could not be sustained as the primary onus was discharged by the Assessee by producing PAN number, bank account, copies of income tax returns of the share applicants. etc. We also find that the Assessing Officer was influenced by the information received by the Investigating Wing and on that basis generally modus operandi by such Entry Operators is discussed in detail. However, whether such modus operandi existed in the present case or not was not investigated by the AO. The Assessee was not confronted with the investigation carried out by the Investigating Wing or was given an opportunity to cross-exam Inc the persons whose statements were recorded by the Investigating Wing.
“These quoted observations clearly distinguish the present case from Oasis Hospitalities (P). Ltd. (supra). Except for discussing the modus operandi of the entry operators generally, the Assessing Officer in that case had not shown whether any link between them and the assessee existed. No enquiry had been made in this regard, Further, the assessee had not been confronted with the material collected by the investigation wing was given an opportunity to cross examine the persons whose statements were recorded by the investigation wing.
In the case before us, not only did the material before the Assessing Officer show the link between entry providers and assessee-company, but the Assessing officer had also provided the statements of Mukesh Gupta and Rajan Jassal to the assessee in compliance with the rules of natural justice. Out of the 22 companies whose name figured in the information given by them to the Mum 15 - M/s Kenhans Shares & Stocks Pvt. Ltd.
investigation wing, 15 companies had provided the so called “share subscription monies” to the assessee. There was thus specific involvement of the assessee- company in the modus operandi followed by Mukesh Gupta and Rajan Jassal. Thus, on crucial factual aspects the present case stands on a completely different footing from the case of Oasis Hospitalities (P) Ltd (supra).”
The facts prevailing in the present case are different. There is no allegation that the share applicants herein are entry operators/accommodation providers. There is no report from the Investigation wing to that effect. We have noticed that the assessee has provided all the information in order to discharge the initial burden placed upon it u/s 68 of the Act. Further these companies have been incorporated long back as detailed below:-
Name of company Date of Incorporation a. M/s Spider Web Solutions Ltd 14-07-1992 b. M/s Saragossa Investment & Finance 20-07-1992 c. M/s Komal Commercial Ltd 26-12-1997 d. M/s Larite Industries Ltd 28-03-1985
In our view, these companies cannot be considered to be the types of flight by night operators, since they have been incorporated long back. Further, it is an undisputed fact that these companies are regularly filing their income tax returns and Company returns. Hence we are of the view that the tax authorities have only entertained presumption that they have provided accommodation entries. We have seen that the assessee has discharged the onus placed upon it and hence, as held by the Hon’ble Supreme Court in the case of CIT Vs. Orissa Corporation (P) Ltd (159 ITR 78) and the Hon’ble Delhi High Court in the case of Hospitalities (P) Ltd (supra), the assessee cannot be penalized for the failure of the AO to discharge the burden shifted upon him. Accordingly we are of the view that the Ld CIT(A) was not justified in confirming the addition. Accordingly we set aside the order passed by Ld CIT(A) and direct the AO to delete the impugned addition.”
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Considering the fact that addition on the basis of which the penalty was levied has already been deleted by co-ordinate bench of this Tribunal, therefore, in our view the penalty order does not survive, which we delete.
In the result, appeal of the Revenue is dismissed.